New Zealand Reserve Bank Governor Adrian Orr issued a harsh warning about cryptocurrencies, especially stablecoins, stating that they cannot replace traditional fiat money.
New Zealand Reserve Bank Governor Critiques Stablecoins as 'Oxymoron'
Speaking to a parliamentary committee in Wellington today, Orr described stablecoins as “the biggest misnomer” and “oxymorons”. “He emphasized that stablecoins are not stable. They are only as good as the balance sheet of the person offering that stablecoin,” he said.
Stablecoins, a type of cryptocurrency token pegged to another asset, rely on large reserves to maintain their value.
However, they can be affected by problems in the traditional financial world, leading to concerns that they could potentially destabilize real-world markets.
When asked whether central banks are concerned that sovereign digital currencies could harm the global financial system, Orr answered in the affirmative.
“The answer is yes, we are seriously concerned,” he said. “Often, what is advertised on the tin for these purported alternatives to central bank cash is not what is inside the tin.”
Orr also commented on Bitcoin, stating that Bitcoin is not a medium of exchange, a store of value, or a unit of account, despite people trying to use it that way.
“It has other purposes, but it is in no way a substitute for, or even a compliment to, central bank money,” he added.
He also explained that fiat currencies such as the New Zealand dollar exist because they have the support of parliament and a reliable institution such as an independent central bank to maintain low and stable inflation.
*This is not investment advice.