During Monday’s parliamentary committee hearing, Adrian Orr, governor of New Zealand’s central bank, voiced worries over the stability of cryptocurrencies, especially stablecoins.
According to Bloomberg, he called out these tokens, calling them “misnomers” and “oxymorons,” and brought attention to the fact that they may be affected by the usual financial storms and real-world market disruptions.
Stablecoins are digital currencies that aim to keep their value constant, often by linking them to a fiat currency like the US dollar. Orr casts doubt on their dependability, nevertheless, by stressing that they are dependent on the financial health of the issuing company.
Bitcoin and other cryptocurrencies fail to meet the three primary functions of money, according to the head of the central bank. These functions include purchasing products and services, preserving wealth, and keeping track of financial transactions.
Central banks throughout the world shared these worries. Orr acknowledged “serious worry” when asked about the possibility of decentralized digital currencies posing a danger to the established financial system, citing the disparity between the advantages they claim to provide and how they work in practice.
He emphasized that, in contrast to the majority of cryptocurrencies, existing fiat currencies, supported by governments and central banks, provide crucial stability and control over inflation.
Orr did not deny blockchain’s revolutionary potential, but he cautioned against using it in financial institutions.
Financial regulators across the globe are trying to figure out what these digital assets are and what they might do with them. This is not the first time that central banks have cautioned against cryptocurrency.
Cryptocurrencies are more dangerous for emerging markets, according to Reserve Bank of India governor Earlie.
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