Speaking at a parliamentary committee meeting, Orr emphasized that stablecoins, which are backed by fiat currencies, cannot replace traditional paper money. He noted that the value of stablecoins is contingent on the financial condition of their issuer, making them vulnerable to disruptions in the financial market. If not properly regulated, stablecoins could pose a threat to the international financial system, according to Orr.
“The term ‘stablecoin’ is misleading because their value relies on the reserves of the issuing entity and does not necessarily remain stable,” said Orr.
Furthermore, Orr questioned the viability of Bitcoin as a currency, explaining that it lacks the fundamental characteristics of traditional money. He pointed out that Bitcoin does not function as a reliable medium of exchange and settlement, nor does it serve as a stable store of value. Orr emphasized that fiat currencies, which are backed by legislatures and government agencies, are irreplaceable by Bitcoin, despite its growing popularity.
It is worth noting that the Reserve Bank of New Zealand began public consultations in 2021 regarding the potential launch of a digital New Zealand dollar. Last year, Ian Woolford, a senior official at the Central Bank of New Zealand, cautioned against cryptocurrencies and called for the swift establishment of regulatory frameworks for them.