MORGAN STANLEY: Here's how the rise of cryptocurrencies could change the way central banks deal with future financial crises

Experts of Morgan Stanley bank have assumed that digital currencies are capable to help increase in negative interest rates within future financial crisis. According to new conclusions of Morgan Stanley, the central banks can use cryptocurrencies to reduce negative consequences of the next financial crisis, having reduced interest rates.

As reports Business Insider, the team of strategists from the international investment bank has told about several areas in which the central banks could apply cryptocurrencies in own favor. The most remarkable use of unstable digital currencies is their application in the sphere of monetary policy. In the report of Morgan Stanley it is said that in case of one more large financial crisis the central banks can bring interest rates to higher negative values, than ever.

Business Insider notes that during the last financial crisis the central banks around the world have sharply reduced interest rates to soften consequences of economic crash for consumers and creditors. Banks of Sweden, Denmark, Japan and the EU have accepted negative interest rates some of which remain to this day (however, it isn't lower than-0,5%). The Morgan Stanley team explains:

"Theoretically, the absolute digital monetary system can provide higher negative rates. It concerns some central banks. Freely addressing paper banknotes and coins (cash) limit ability of the central banks to apply negative rates on deposits. The digital version of cash theoretically is able to afford introduction of negative rates which will become covered from all money in circulation in any economy".

Nevertheless, researchers have also explained that their report "doesn't mean that we find possible introduction of digital fiatny currency and have studied all consequences of a similar step". Besides, there are some serious potential problems inherent in such digital system. Specialists of Morgan Stanley note:

"High and long negative rates finally are problematic for banks. Then the central banks should address directly buyers of currency for monetary policy implementation, considerably reducing leverage in system and reducing growth rates of GDP".