During a recent parliamentary committee meeting on Monday, Adrian Orr, the governor of New Zealand’s central bank, expressed apprehension regarding the stability of cryptocurrencies, with a specific focus on stablecoins.
Describing them as “misnomers” and “oxymorons,” Orr underscored their susceptibility to conventional financial instability and their capacity to unsettle real-world markets, as per Bloomberg’s report.
Stablecoins are crafted to uphold a steady value, frequently tied to tangible assets such as the US dollar. However, Orr stressed that their dependability is contingent upon the financial robustness of the entity issuing them, casting doubt on their reliability.
Crypto Can Not Replace Fiat
The central bank’s governor further underscored that cryptocurrencies such as Bitcoin fail to fulfill the fundamental roles of money, which include serving as a medium of exchange, a store of value, and a unit of account.
These statements echoed broader concerns shared by central banks worldwide. When pressed about the possible threat posed by independent digital currencies to the traditional financial system, Orr admitted a “critical concern” stemming from the disparity between their advertised benefits and their actual functionality within the financial system.
He emphasized that established fiat currencies, backed by government and central bank authority, offer crucial stability and inflation control, a feature lacking in most cryptocurrencies.
While Orr acknowledged the innovative potential of blockchain technology, he advocated for prudence in its integration into financial systems.
Central banks globally are actively striving to comprehend and address the potential risks and opportunities presented by these digital assets. Several other central banks have also issued similar warnings regarding cryptocurrencies.
Previously, the governor of the Reserve Bank of India cautioned that cryptocurrencies pose a heightened threat to developing economies.