Are stablecoins truly stable? Astonishing doubts of the Reserve Bank of New Zealand.
Stability of Stablecoins Raises Concerns in New Zealand
The Governor of the Reserve Bank of New Zealand, Adrian Orr, has expressed doubts about the stability of stablecoins, describing them as “the biggest misnomer” and “oxymoronic phenomena”. According to him, stablecoins are not stable and their value depends on the balance sheet of the entity offering them.
Orr emphasized that transparency and honesty are crucial in the cryptocurrency space. He also stated that stablecoins are “speculative tokens” and cannot be treated as currency or central bank-issued cash.
Importantly, Adrian Orr also commented on Bitcoin. According to the governor, it is neither a means of payment, a store of value, nor a unit of account, despite some people trying to use it as such.
A report published by the New Zealand Parliament titled “Inquiry into the current and future nature, impact, and risks of cryptocurrencies” states that cryptocurrencies and digital assets should be regulated slowly and purposefully.
Despite the central bank’s concerns about the stability of stablecoins, New Zealand is among the 46 countries worldwide conducting research on the introduction of a central bank digital currency (CBDC). According to a report published by the Reserve Bank of New Zealand in July 2023, there is a possibility of introducing a CBDC in the future.
Currently, there is no ban on the use of cryptocurrencies in New Zealand, although they are not recognized as an official means of payment. Cryptocurrencies are classified as designated financial products by the country’s regulator, the Financial Markets Authority (FMA).
According to data from the Atlantic Council, as of December 2023, 11 countries have launched their own central bank digital currency, 21 have started pilot programs related to digital currencies, and 33 countries have begun developing their own CBDC.
The future of central bank digital currencies remains uncertain, but many countries worldwide are already making progress in this field. New Zealand is also exploring the possibility of introducing its own central bank digital currency. Further research and regulations are necessary to ensure the safety and stability of this evolving market.
