Morgan Stanley, the investment bank, has found that the use of cryptocurrencies and digital currencies could help mitigate the consequences of the next financial crisis. This was one of the conclusions of a study that inquired about the possible use of cryptocurrencies and digital currencies in the monetary policy of the country, according to Business Insider.
Morgan Stanley is a financial institution that functions as an investment bank, offering financial services in more than 40 countries all around the world. It has more than 55.000 employees serving more than 100k customers, achieving revenue of more than 30 billion dollars last year.
The study, led by market analyst Sheena Shah, had some interesting findings. But maybe the most important one is that they concluded that the use of a system with cryptocurrencies or a digital-only currency could enable negative interest rates. Negative rate interest policies enable people to receive money for borrowing money. This should boost the flow of money into the system, and that will eventually lead to an economic recuperation. But for this to happen, physical cash flow must be minimal. She stated:
“FREELY CIRCULATING PAPER NOTES AND COINS (CASH) LIMITS THE ABILITY OF THE CENTRAL BANKS TO FORCE NEGATIVE DEPOSIT RATES”
But she also admitted that this would, in the long run, cause problems. Negative interests rates cause deflation and this leads eventually to an economic growth decrease. To finish, Sheena states that they are “not intended to suggest where we think a digital fiat currency could be implemented or all the reasons why”.
The topic of national cryptocurrencies has become a hot issue this year, with several countries preparing the issuance of their own cryptocurrencies, mostly with the objective of avoiding economic sanctions. This is the case of the Venezuelan Petro. But this is the first serious study that explores the possible benefits of adopting cryptocurrencies or an only digital currency system as aiding instruments of a possible future monetary policy.