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Central banks could use encryption to force negative interest rates on the public: Morgan Stanley

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Central banks will one day use government-backed cryptocurrencies to quickly deal with the risks of future financial crises Morgan Stanley researchers predicts in a new report.

The report, which examines how central banks could use state crypto-currencies to better manage their monetary supplies, theorizes that this technology would allow central banks to take negative interest rates at historical levels by imposing policies directly on the money supply. intermediaries such as financial institutions.

"In theory, a 100% digital currency system could allow higher negative rates," wrote a Morgan Stanley team led by strategist Sheena Sha in the report, according to Business Insider. "That appeals to some central banks."

This would be possible, said Shah and his team, because the central bank would have the ability to simultaneously adopt its policies on the entire cash supply in circulation, which is the best way to go. she can not do with physical money.

Extract from the report:

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"Cash and free circulation coins (cash) limit the ability of central banks to force negative deposit rates.A digital version of money could theoretically allow deposit rates Negatives to be levied on any money outstanding in any economy. "

"Central banks should then address directly to money users to implement monetary policy, significantly reduce the leverage of the system and reduce GDP growth," say the researchers. Morgan Stanley.

But if such a system would greatly increase the effectiveness of implementing central bank policies, one imagines that – because money would no longer be available as a safe harbor – it could also result in massive capital outflows to decentralized cryptocourses.

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When rumors begin to circulate that a bank should start charging a negative interest rate – a policy that forces people to pay fees to hold the currency – people could turn to bitcoin or other decentralized cryptocourses to secure their wealth, although this decision would likely depend on the volatility of these assets.

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