In a parliamentary committee session on Monday in Wellington, Adrian Orr, the governor of the Reserve Bank of New Zealand, expressed significant apprehensions about digital assets, particularly stablecoins, emphasizing their perceived stability as the biggest misnomers and oxymorons. Governor Orr’s comments brought attention to the vulnerabilities present in stablecoins, digital currencies linked to other holdings.
Contrary to their name, Orr highlighted that stablecoins do not always maintain a stable value. The governor stressed that the stability of stablecoins is contingent upon the financial health of the entity backing them, underscoring the reliance on the issuer’s balance sheet. While stablecoins typically rely on substantial reserves to uphold their value, they remain susceptible to disruptions in the traditional financial landscape.
Central banks globally have previously voiced concerns about stablecoins potentially introducing instability into real-world markets in response to economic challenges. Orr, in particular, warned that if not closely monitored, stablecoins could pose a threat to the global financial system. He reportedly expressed concern that the features and advantages of these supposedly new forms of currency may not align with their actual effectiveness when compared to traditional central bank money.
Orr cast doubt on Bitcoin’s potential as a widely used currency, highlighting its shortcomings in key areas like stable value, reliable transactions, and universal acceptance. Despite Bitcoin’s popularity and widespread use in certain circles, Orr emphasized that it lacks the necessary attributes to function effectively as a currency.
Orr highlighted the essential role of fiat currencies, such as the New Zealand dollar, attributing their credibility to the backing of legislative authority and the oversight of reputable institutions like independent central banks. Pointing out central banks’ duty to maintain controlled inflation, Orr argued that this underpins the very foundation of confidence and stability in fiat currencies.
As the debate over the future of digital assets continues, Orr’s comments provide valuable insights from a central banking authority, raising awareness about the risks associated with stablecoins and questioning the viability of Bitcoin as a mainstream currency.
Despite criticism, Bitcoin is once again edging towards the $50,000 threshold, demonstrating resilience after a recent correction. The current price stands at $49,784.80, surpassing the January high and marking a 3.41% increase in the last 24 hours. The question lingers on whether this upward trajectory will persist
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