coindesk.com
Stablecoins are only as stable as their issuer’s balance sheet, New Zealand’s central banker said during a hearing.
Fiat currency is the best kind of money because it is backed by the government, he continued.
Stablecoins are an oxymoron, New Zealand central bank governor Adrian Orr said during a parliamentary heading, according to a report by Bloomberg.
“Stablecoins are not stable. They’re only as good as the balance sheet of the person offering that stablecoin,” he is quoted as saying.
Some stablecoins have had their peg tested because of concerns about their balance sheet or the health of the institutions that store their assets.
TrueUSD (TUSD) was knocked off its peg and remains trading at under $1 because of concerns about its ability to redeem the issued stablecoins for fiat currency, CoinDesk reported in January. Last year, USDC fell to around 95 cents on the dollar when Circle announced that it had significant reserves stuck at the failed Silicon Valley Bank.
The New Zealand dollar and similar fiat currencies are backed by parliamentary authority and upheld by an independent central bank to ensure low, stable inflation, Orr is quoted as saying.
Meanwhile, there is a growing chorus of voices from both the Federal Reserve and academia to build systems to ensure stablecoin stability.
In January, Cantor Fitzgerald CEO Howard Lutnick, whose firm manages a significant amount of Tether's assets, said during a Bloomberg TV interview that the stablecoin issuer “has the money.”
“I manage many of their assets,” said Lutnick. “From what I’ve seen – and we did a lot of work – they have the money they say they have.”