Reserve Bank of New Zealand Governor Adrian Orr has issued a warning about crytocurrencies such as stablecoins, saying they are no substitute for fiat money.
Stablecoins are “the biggest misnomers” and “oxymorons,” Orr told a parliamentary committee yesterday in Wellington. “Stablecoins are not stable. They’re only as good as the balance sheet of the person offering that stablecoin.”
Stablecoins, a form of crypto token pegged to another asset, use large reserves to support their value. They can be buffeted by troubles in the traditional financial world, and some worry they could have the potential to rock real-world markets in return.
Photo: Bloomberg
Orr was asked whether central banks are concerned that independent digital currencies could undermine the global financial system.
“The answer is yes, critically concerned,” he said. “Mostly in that what is advertised on the tin is not what is in the tin for these purported alternatives to central bank cash.”
Orr said bitcoin is not a means of exchange, a store of value or a unit of account “yet people try to use it as that.”
“It’s got other purposes but it is not at all a substitute for, not even a complement to, central bank money,” he said.
Fiat currencies such as the New Zealand dollar exist because they have the power of parliament behind them “and a credible institution such as an independent central bank to maintain low and stable inflation,” he added.
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