Adrian Orr, the governor of New Zealand's central bank, delivered a scathing critique of stablecoins during his appearance before the Parliamentary Finance Committee on February 12, asserting that they are not a viable substitute for fiat currencies and are inherently "unstable."
Addressing concerns about decentralized digital currencies and stablecoins, Orr emphasized the Reserve Bank of New Zealand's (RBNZ) significant apprehension, labeling stablecoins as the "biggest misnomer" and an "oxymoron." He expressed skepticism about their stability, highlighting their reliance on the financial health of the entities issuing them.
Orr contended that stablecoins lack the fundamental attributes of a reliable currency, such as being a means of exchange, a store of value, or a unit of account. He criticized attempts to utilize cryptocurrencies like Bitcoin for such purposes, stating that they do not fulfill the requisite functions of money.
Highlighting the importance of fiat currencies like the New Zealand dollar, Orr underscored their backing by parliamentary authority and the support of dependable institutions like independent central banks, which play a crucial role in maintaining low and stable inflation rates.
Regarding regulatory oversight, Orr emphasized the necessity of transparency and forthrightness, categorizing stablecoins as speculative assets rather than genuine currencies or equivalents to central bank-issued cash. He stressed the importance of robust regulation, citing the complexities of the regulatory landscape, particularly in jurisdictions like the UK.
In light of ongoing discussions about cryptocurrency regulation, Orr referenced a parliamentary report from August 2023 that advised against hastily implementing regulatory frameworks. Instead, it recommended the development of comprehensive guidance aligned with existing laws to ensure a measured approach to digital asset regulation. Additionally, New Zealand is actively exploring the potential benefits and drawbacks of introducing a central bank digital currency (CBDC), as evidenced by ongoing research into advanced design options and their associated costs and benefits, according to a report from July 2023.
