The head of New Zealand’s central bank, Adrian Orr, sounded the alarm on cryptocurrencies in a parliamentary hearing on Monday, questioning the stability of major digital assets like Bitcoin">Bitcoin and stablecoins.
Orr criticized stablecoins, which aim to maintain a steady value, as “misnomers” and “oxymorons.” He argued their supposed stability depends entirely on the financial strength of the issuing entity. Thus, they remain vulnerable to market stress that could severely impact their value, disrupting real-world markets.
The central bank governor also stressed that cryptocurrencies fail to fulfill the three core functions of money – serving as a medium of exchange, store of value, and unit of account. These concerns echo wider central bank worries about crypto’s threat to traditional finance.
When asked if independent digital tokens could destabilize existing systems, Orr admitted “critical concern,” citing the mismatch between promised benefits and actual functionality. He emphasized that government-backed fiat currencies provide essential stability and inflation control that most cryptocurrencies lack.
Orr recognized the technology’s promise but urged caution for financial applications. Central banks globally are still assessing risks versus opportunities. The governor of India’s central bank recently issued a similar warning that crypto poses an outsized threat to developing economies.
According to Orr, the bottom line is that decentralized digital assets cannot replace the critical roles that sovereign currencies play. Backed by institutional authority, fiat money offers reliability that crypto does not. While the technology holds potential, Orr joins other monetary chiefs in sounding the alarm on just how destabilizing cryptocurrencies could become if left unchecked. Tighter regulation is likely necessary to mitigate emerging risks.
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