It is becoming merrier for cryptocurrencies and its backbone, blockchain over the past few months as it continues to assume increased significance across several sectors of the world’s economy. Any doubts on the efficiency of the technology have been cleared and a peak adoption period could be reached pretty soon.
The first predicted move according to the report released by Morgan Stanley would be crucial to helping central banks around the world effectively subvert future financial crises that may be worse than the global crisis suffered in 2007-2008.
The proposal would involve using cryptocurrency tokens to cut interest rate once a potential financial crisis is spotted. This would directly allow the implementation of negative rates by central banks in a bid to protect its lenders from crisis while ensuring that both parties incur no heavy losses.
A Closer Look At Cryptocurrencies Helping Banks Fight Global Financial Crisis
While there were no talks of cryptocurrencies totally eclipsing the use of fiat currency, the Morgan Stanley research team led strategist Sheena Shah, suggested that many central banks would beat financial crisis if cryptocurrencies were at the heart of monetary policies.
“Theoretically, a monetary system that is 100% digital may enable deeper negative rates.”
“This appeal to certain central banks,” the team further disclosed.
“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.”
The major setback could be the ‘deep and long-standing negative rates becoming problematic for banks, but even that too can be dealt with according to Shah’s team.
“Central banks would then have to go directly to currency users to implement monetary policy, reducing leverage in the system significantly and cutting GDP growth”, they suggested.
Through its hatching years, global interest in cryptocurrencies has had it high and low points. While many central banks, including the Bank of England, are finding applications for the technology, many countries won’t just give their consent to the innovative power of the digital money era.
With the possibility of helping the world avert a potential crisis, however, there is new hope that cryptocurrencies and blockchain will finally gain its rightful place in the world’s list of greatest inventions.
Will this dream be achieved?