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The New Zealand Central Bank governor, Adrian Orr, recently branded stablecoins “the biggest misnomers” and “oxymorons.” Orr also rejected the notion that cryptocurrencies could serve as a replacement or supplement to central bank-issued money.
Stablecoins Not a Viable Substitute for Money
Despite their rise as an alternative to fiat currency in some regions, stablecoins are neither stable nor a viable substitute for money, according to Adrian Orr, the governor of the New Zealand Central Bank. Orr recently made these remarks during a parliamentary committee meeting, where he referred to stablecoins as the “biggest misnomers” and “oxymorons.”
Many popular stablecoins, including USDT, are pegged at par with the U.S. dollar. To maintain this parity, issuers often back these stablecoins with financial assets such as U.S. treasuries, gold, and bitcoin. Traditional cryptocurrencies on the other hand are not pegged to any fiat currency.
According to a Bloomberg report, the New Zealand central bank governor also believes the value of stablecoins is only “as good as the balance sheet of the person offering that stablecoin.” Meanwhile, when asked if central banks’ concerns or worry over stablecoins’ rise are justified, Orr said:
“The answer is yes, critically concerned. Mostly in that what is advertised on the tin is not what is in the tin for these purported alternatives to central bank cash.”
Regarding bitcoin, the central bank governor acknowledged its widespread use as a form of money, despite it not being a traditional medium of exchange. Orr however rejected the notion that cryptocurrencies could serve as a replacement or supplement to central bank-issued money.
He also contended that fiat currencies, such as the New Zealand dollar, hold their value because they are supported by parliamentary backing and managed by an independent central bank tasked with maintaining low and stable inflation.
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