The Governor of the Reserve Bank of New Zealand, Adrian Orr, expressed concern about digital currencies, calling them oxymorons and the biggest misnomers.
The head of the central bank of the mentioned country made a statement on Monday, February 12, during a meeting of the parliamentary committee. He also noted that digital money is not a substitute for fiat currency.
Adrian Orr stated that stablecoins are not stable. In his opinion, the corresponding digital money is as good as the balance sheet of the one who offers this new generation currency. The mentioned virtual money is pegged to another asset and uses large reserves to maintain its value.
Stablecoins are a form of crypto token. These virtual coins can be buffeted by troubles in the traditional financial world. There are also concerns that stablecoins, as part of a response to the mentioned challenges, may harm the markets.
During a parliamentary committee meeting, Adrian Orr was asked if central banks were worried that independent digital currencies could undermine the global financial system. The answer to this question was yes. Adrian Orr stated in this context that what is advertised on the tin can is not a real filling of the capacity. This response was a kind of demonstration of his attitude towards the proposed alternatives to the central bank’s cash.
Adrian Orr also stated that Bitcoin is not a medium of exchange, but people are trying to use it precisely within the framework of the appropriate applying scenario. The head of the central bank of Indonesia noted that the mentioned digital currency has other purposes, but does not replace or even complement the money of the financial regulator.
Adrian Orr spoke about his perception of digital currencies a few days after United States Treasury Secretary Janet Yellen, during a speech before the House Financial Services Committee, stated concerns about stablecoins. She noted that the Financial Stability Oversight Council when monitoring various risks, focused on digital assets and the potential negative aspects of its use. In this context, Janet Yellen mentioned the launch of crypto platforms and stablecoins, vulnerabilities related to the volatility of the value of crypto assets, and the spread of platforms that operation is carried out outside the area of laws or in violation of existing rules in the financial system.
The Treasury Secretary of the United States also stated the need to ensure compliance with regulations. She called on Congress to pass a law regulating stablecoins and the spot market for crypto assets that are not securities.
The intention to separate digital assets that are not securities is a kind of signal about the changes that may occur with cryptocurrencies and virtual coins designed to be tied to value stores or used as part of making purchases.
Two years ago, the Federal Reserve posted a publication on its blog that contained a statement that stablecoins are not the future of payments. The financial regulator also noted that the reserve backing of the mentioned digital coins can tie up assets and reduce liquidity. Separately, the Federal Reserve said that tokenized deposits would be the best option.
Two years ago, in the United States, more than a third of companies held the view that using blockchain and cryptocurrencies was too risky. However, digital solutions will in one or another way move into the category of traditional assets in the future and add to the list of facts about US money. It is still unknown when exactly this will happen. At the same time, one should not exclude the possibility of an unforeseen scenario for the development of the financial system, which will provide for currently non-existent means of payment and types of assets.
As we have reported earlier, Hong Kong Proposes New Regulatory Regime for Stablecoin Issuers.