The New Zealand Central Bank governor, Adrian Orr, has stated that Bitcoin is not a store of value, and that he is “critically concerned” about decentralized digital assets. Moreover, he believes that digital currencies cannot replace fiat currencies but pose a risk to the current financial infrastructure.
In a statement given to the parliamentary finance committee on February 12, Orr stated that stablecoins are “the biggest misnomers” and “oxymorons.” The central banker is possibly referencing the collapse of multiple stablecoins in 2022.
New Zealand Central Bank: Bitcoin is a Critical Concern
Orr was asked if the Reserve Bank of New Zealand (RBNZ) considered stablecoins and digital currencies as a concern, and he confirmed that the emerging asset class is a “critical concern” for the regulator.
“Bitcoin is neither a means of exchange, nor a store of value, nor a unit of account, yet people try to use it as that,” Orr said while adding:
“Likewise stablecoins, I think, are the biggest misnomers […] Stablecoins are not stable. They are only as good as the balance sheet of the person offering that stablecoin.”
On the other hand, central banks around the world are gradually opening their doors to Bitcoin. As reported earlier, the Central Bank of Nigeria (CBN) officially lifted its ban on Bitcoin, facilitating its transactions in December 2023.
“Current trends globally have shown that there is a need to regulate the activities of virtual asset service providers (VASPs), which include cryptocurrencies and crypto assets,” CBN further noted.
Additionally, in 2022, central bankers from over 44 countries who visited El Salvador were seen lined up to get help downloading and using the Bitcoin Beach Lightning wallet.
Stablecoins are ‘Not Stable’
Orr stated that stablecoins are “not stable” while noting that fiat currencies like the New Zealand dollar exist because they are backed by the government and the parliament of the country. They have a “credible institution such as an independent central bank to maintain low and stable inflation” behind them, the banker said.
He added:
“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.”
Also, according to a July 2023 report, New Zealand is exploring “high-level design options for the CBDC and their costs and benefits.” Central bank digital currencies, or CBDCs, have been a controversial topic for the digital asset and financial sectors.
Slow and Agile Approach for Regulation
Back in June 2023, Ian Woolford, the Reserve Bank of New Zealand’s director of money and cash, stated that the central bank agrees that “a regulatory approach isn’t needed right now, but increased vigilance is” for the digital asset sector.
RBZ stated:
“We agree that caution is needed, which also reinforces the need for enhanced data and monitoring to build understanding.”
On the other hand, a report prepared for the New Zealand Parliament has recommended a slow, agile approach for regulation of Bitcoin and the digital asset sector.
“Creating and implementing an integrated [regulatory] framework would be a complicated endeavour. […] Based on our understanding, agencies are not resourced or equipped to manage this,” the report said while suggesting lawmakers take their time creating a framework.
