New Zealand Central Bank Governor Adrian Orr made a statement that had a significant impact on the world of cryptocurrency. His remarks brought about major concerns regarding digital assets, particularly stablecoins. He stated that money pegged to fiat could never truly replace real fiat currency.
The Misconception of Stability in Stablecoins
In a period dominated by the rise of cryptocurrencies, New Zealand Central Bank Governor Adrian Orr made an important statement about stablecoins.
In his statement, the governor also addressed the perceived stability of stablecoins, describing them as “the greatest misnomers” and “oxymorons”.
Orr pointed out that, contrary to their “stable” name, crypto tokens pegged to fiat currencies do not always maintain a stable value. He emphasized that the supposed stability of stablecoins is only as reliable as the financial statements of the supporting institution, highlighting the dependence on trust in the issuer’s balance sheet.
The foundation and stability structure of stablecoins generally rely on significant reserves, but they are vulnerable to events in the traditional financial environment. Some of the world’s leading central banks have also emphasized concerns about the potential of stablecoins to introduce instability in response to economic challenges, due to their nature and structure.
Moreover, the Governor of the New Zealand Central Bank said that stablecoins could harm traditional finance and added:
What is often advertised on the tin is not what’s inside the tin for these so-called alternatives to central bank cash.
The Limited Structure of Bitcoin
Adrian Orr also commented on the likelihood of Bitcoin becoming a mainstream currency as being very slim in a recent interview. According to Orr, Bitcoin falls short of fulfilling the basic functions of a currency. It is far from being a secure medium of exchange and cannot provide the confidence to serve as a stable store of value.
Despite its increased popularity and widespread use in certain circles in recent years, Orr stated that Bitcoin cannot perform the same function as existing currencies and lacks the necessary qualities.
Moreover, Orr believes that even if Bitcoin serves alternative purposes, it cannot replace or even complement traditional central bank money.
