In a refreshing departure from typical central bank rhetoric, Adrian Orr, the governor of the Central Bank of New Zealand, has taken a bold stance against stablecoins, labeling them as unreliable and unsuitable replacements for traditional currency.
Speaking at a parliamentary finance committee meeting on Feb. 12, Orr didn’t mince words, describing stablecoins as “the biggest misnomers” and “oxymorons.” He questioned the stability of stablecoins, pointing out that their value hinges on the financial health of the entities backing them. Orr also expressed doubts about the utility of cryptocurrencies like Bitcoin, asserting that they lack the qualities necessary to function as a dependable medium of exchange, store of value, or unit of account. He emphasized the speculative nature of these digital assets, cautioning against conflating them with genuine currency or central bank cash.
Orr underscored the robust foundation of fiat currencies, such as the New Zealand dollar, which benefit from legislative support and the oversight of an independent central bank committed to maintaining low and stable inflation rates. The Reserve Bank of New Zealand’s (RBNZ) critical stance on stablecoins and cryptocurrencies reflects a broader trend in global central banking, aligning with efforts to assess and mitigate the potential risks these digital currencies pose to the traditional financial system.
Despite his skepticism, Orr emphasized that New Zealand is taking a cautious approach to cryptocurrency regulation. A parliamentary report from August 2023 advised against hasty regulatory interventions, recommending instead the establishment of clear and consistent legal frameworks for digital assets.
The country is also exploring the potential issuance of a central bank digital currency (CBDC), weighing the associated costs and benefits against various design options as of July 2023.
Orr’s remarks echo the concerns of central banks worldwide regarding the stability and viability of cryptocurrencies within the existing financial landscape. Similar sentiments have been expressed by other central banks, including the Reserve Bank of India, underscoring the perceived risks, particularly for developing economies.
(Source: CoinDesk | Bloomberg | Crypto News)
