New Zealand Central Bank Governor Expresses Concerns Over Stablecoins

• Fiat-pegged stablecoins cannot be considered a replacement for fiat currency as per Orr.
• He made the point that the issuer’s balance sheet is crucial to the stability of stablecoins.

New Zealand’s central bank governor Adrian Orr has voiced serious worries about digital assets, particularly stablecoins. Furthermore, he emphasized that fiat-pegged stablecoins cannot be considered a replacement for actual fiat currency.

Reserve Bank of New Zealand Governor Adrian Orr warned about stablecoins’ seeming stability, calling them “the biggest misnomers” and “oxymorons.” Orr brought attention to the inherent hazards of stablecoins with his statements made during a parliamentary committee hearing on Monday in Wellington.

Issuers Balance Sheet Crucial

Stablecoins, which are cryptocurrency tokens tied to other assets, don’t always keep their value constant, as Orr pointed out. He made the point that the issuer’s balance sheet is crucial to the stability of stablecoins, as their value is dependent on it.

Although stablecoins have large reserves to keep their value steady, they are nonetheless susceptible to changes in the conventional financial system. In reaction to economic difficulties, several of the world’s leading central banks have voiced fear that stablecoins would cause real-world market volatility.

Furthermore, the head of the central bank of New Zealand warned that stablecoins may destabilize the international monetary system if they are not closely regulated. Mainly because these so-called alternatives to central bank cash don’t deliver on their promises, he said.

While discussing Bitcoin’s potential as a widespread currency, Adrian Orr also cast doubt on the idea. The three primary roles of a currency—a medium of trade, a store of value, and an accounting unit—are not adequately performed by Bitcoin, according to Orr.

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