New Zealand’s central bank governor told the parliamentary Finance and Expenditure Committee that stablecoins are not a substitute for fiat money and are not as stable as purported.
New Zealand central bank governor Adrian Orr has issued a red alert on investors using stablecoins and other digital assets as an alternative to the fiat currency. During a recent hearing scheduled by New Zealand’s parliamentary Finance and Expenditure Committee, Orr highlighted that stablecoins are not a substitute for the fiat currency, which is backed by the government and controlled by the central bank.
Notably, Orr was responding to a question about whether the Reserve Bank of New Zealand (RBNZ) is concerned about the heightened use of decentralized digital assets like Bitcoin and stablecoins in place of fiat currencies. According to Orr, Bitcoin and stablecoins are neither a means of exchange nor a store of value, despite the high adoption from speculative investors.
He further expressed his concerns over the use of stablecoins as they are only as good as the balance sheet of the underlying issuer. As a result, Orr told the committee members that stablecoins are ‘the biggest misnomers and oxymorons’.
“The number one thing we can do is be as transparent and blunt as we can. They are speculative coins, not currency and not central bank cash,” Orr noted.
Orr urged the regulators to provide clear guidelines on the stablecoins that are punitive and harsh to violators just like the United Kingdom. Moreover, the rise of Bitcoin around the world as a reputable asset class has attracted more developers and investors to the stablecoins industry, which is critical to the mainstream adoption of the speculative crypto industry.
New Zealand on Crypto Regulations
The RBNZ has been working to modernize the New Zealand dollar (NZD), to ensure a sustainable future. Already, the RBNZ has been working with different stakeholders to develop a digital NZD that is competitive on a global scale. Furthermore, other countries led by China have made significant progress in the rollout of the respective Central Bank Digital Currency (CBDC). Earlier last year, the RBNZ recognized crypto and stablecoins as a new form of money that creates opportunities for local investors and poses notable risks as well.
New forms of money such as crypto and stablecoins create opportunities and risks for New Zealanders and the financial system. Have your say now on these and how we should respond: https://t.co/RE9j0ryjVk#rbnz pic.twitter.com/yvcR2tjd9y
— Reserve Bank of NZ (@ReserveBankofNZ) February 10, 2023
As a result, the country’s regulators are keen to ensure the best regulatory framework for crypto and stablecoins that enables the long-term stability and prosperity of the NZD and local investors.
The mass adoption of digital assets around the world is inevitable as demonstrated by the United States, which recently approved the trading of spot Bitcoin ETFs. More global regulators are expected to enact clear rules that enable the safe adoption of web3 and crypto assets in the coming years. Moreover, the majority of world governments are struggling with high debts led by the US which recently passed $34 trillion.