Skip to Content

Another day, another reason why crypto becomes more of a normality in our society.

Morgan Stanley: Crypto Currency may be the answer to the next financial crisis

A Morgan Stanley team recently published a report on how central banks can utilize crypto currency to improve the banking sector! The report suggests that Central Banks can use cryptocurrencies to cut interests rates in the case of a future financial crisis!

A lot of naysayers believe that crypto has no societal value but as this report suggests, it can have huge implication for those creating monetary policy. They fiat system could allow Central Banks to create negative interest rates with more ease than current models. As Sheena Shah head of the reports says "Theoretically, a monetary system that is 100% digital may enable deeper negative rates." They continue to state that “Freely circulating paper notes and coins (cash) limits the ability of the central banks to force negative deposit rates. A digital version of cash could theoretically allow negative deposit rates to be charged on all money in circulation within any economy,”

As we saw in the most recent recession central banks were quick to slash interests rates to almost zero. Some countries even went into sub zero rates (as seen in the chart below)

As you can see in the aftermath of the financial crisis; Europe, Denmark, Japan, Sweden have interests rates dropping faster than (insert some crypto that sucks). The most unnerving thing is there is an idea that in the NEXT crisis rates may have to fall below -5% which has never been done before. It could lead our world into a territory not known to man. The adoption of concurrency can give central banks just the ammunition it needs to combat the next recession!

In their report they are making it clear that it may not address the needs of every country. "This appeals to certain central banks," The team clarifies.

Like anything new there is the unknown, which could lead to issues. Sheena Shah warns that "Central banks would then have to go direct to currency users to implement monetary policy, reducing leverage in the system significantly and cutting GDP growth." (In this readers opinion such an event would democratize monetary policy which has its pro’s)

This scrutiny isn’t new however. As more and more central banks begin issuing their own reports you will have those who warn that crypto currencies could harm a society. Such as Jens Weidmann, who heads Germany's Bundesbank warns bitcoin and the like can exasperate a financial crisis. On the other side of the coin you have Sweden who are contemplating issuing their own cryptocurrency, the eKrona.

My opinion is that these policy makers are slow to act and understand what is happening in the crypto world. As anyone who has their finger on the crypto pulse you know this world moves faster than anything you've seen before. We need to write to policy makers and more importantly VOTE policy makers who understand technology and not fumble with the concept of what it is were using (as seen in the congressional hearing with Mark Zuckerberg) Anyway you look at it these reports are a sure sign that the future is CRYPTO!


Join in on the conversation with Thecryptohistorian when you subscribe to CRYPTONICLES.