New Zealand’s central bank governor, Adrian Orr, raised concerns about the stability of cryptocurrencies, particularly stablecoins, during a parliamentary committee meeting on Monday.
He criticized these tokens as “misnomers” and “oxymorons,” highlighting their vulnerability to traditional financial turmoil and potential to disrupt real-world markets, Bloomberg reported.
Stablecoins are designed to maintain a consistent value, often pegged to real-world assets like the US dollar. However, Orr emphasized that their stability hinges on the financial strength of the issuing entity, raising doubts about their reliability.
Crypto Can Not Replace Fiat
The central bank’s governor further emphasized that cryptocurrencies like Bitcoin do not fulfill the fundamental roles of money – serving as a medium of exchange, a store of value, and a unit of account.
These remarks echoed wider concerns among central banks globally. When questioned about the potential threat of independent digital currencies to the traditional financial system, Orr admitted “critical concern” due to the discrepancy between their advertised benefits and their actual functionality within the financial system.
He stressed that established fiat currencies, backed by government and central bank authority, provide essential stability and inflation control, unlike most cryptocurrencies.
While Orr acknowledged the innovative potential of blockchain technology, he urged caution regarding its application in financial systems.
Central banks worldwide are working to understand and address the potential risks and opportunities these digital assets present. Several other central banks have issued a similar warning against cryptocurrencies.
Earlie, the governor of Reserve Bank of India warned that cryptocurrencies pose a higher threat to developing economies.
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