Adrian Orr, the governor of the Reserve Bank of New Zealand (RBNZ), has raised concerns about stablecoins, arguing that they are not a reliable substitute for fiat currency and are inherently unstable.
During a recent session with a parliamentary finance committee on February 12, Orr criticized stablecoins as “the biggest misnomers” and “oxymorons.”
He emphasized the central bank’s critical concern regarding decentralized digital currencies and stablecoins, highlighting their lack of stability.
Orr pointed out that stablecoins, like Bitcoin, do not fulfill the essential functions of money, such as serving as a means of exchange, a store of value, or a unit of account. He stressed that stablecoins are only as reliable as the financial health of the entities issuing them, undermining their stability claims.
Unlike fiat currencies, which are backed by the authority of parliament and supported by independent central banks to ensure low and stable inflation, Orr argued that stablecoins lack the necessary institutional backing for stability.
“The number one thing we can do is be as transparent and blunt as we can. They are speculative coins, not currency, and not central bank cash,” Orr said, advocating for greater regulatory oversight on stablecoins. He cited the United Kingdom as an example of a jurisdiction taking a rigorous approach to stablecoin regulation.
This warning comes amid ongoing discussions in New Zealand regarding cryptocurrency regulation. In August 2023, a parliamentary report advised against rushing into crypto regulation, urging for coherent and consistent guidance on the treatment of digital assets under existing laws.
Furthermore, New Zealand is actively exploring options for the development of a central bank digital currency (CBDC), as it its potential benefits and drawbacks.
A July 2023 report highlighted the country’s efforts to explore high-level design options for a CBDC, considering its implications on the financial landscape.