UN urges to restrict crypto in developing countries

UN Conference on Trade and Development (UNCTD) released three policy briefs on the dangers of the rising use of cryptocurrency in developing countries

UN crypto

Source: unctad.org

UNCTAD estimated that the top three developing economies with the most rapid crypto adoption are Ukraine, Russia, and Venezuela. The percentage of their citizens who own crypto assets is 12.7%, 11.9%, and 10.3% respectively.

The three policy briefs released by UNCTAD shed light on the following issues:

  • “Public payment systems in the digital era: Responding to the financial stability and security-related risks of cryptocurrencies” reveals the dangers of cryptoisation to the monetary sovereignty

On one hand, digital assets allow users to leverage remittance and protect their assets from currency inflation. On the other hand, crypto may pose threats to the monetary sovereignty of these nations. Namely, the personal risk of owning crypto could become a public risk if its use surpasses that of a local currency. Such an outcome will require banks to step in to protect financial stability.

  • “Public payment systems in the digital era: Responding to the financial stability and security-related risks of cryptocurrencies” argues that a domestic digital payment system could fulfil at least some of the reasons for crypto use and limit the expansion of cryptocurrencies in developing countries. Considering the risk of emphasizing the digital divide in developing countries, UNCTAD urges authorities to maintain the issuance and distribution of cash.

  • Finally, “The cost of doing too little too late: How cryptocurrencies can undermine domestic resource mobilization in developing countries” brief discusses how cryptocurrencies may enable tax evasion and avoidance through illicit flows.

Therefore, the agency advises authorities of developing countries to:

  • Introduce comprehensive financial regulation of cryptocurrencies and ban regulated financial institutions from holding crypto (including stablecoins) or offering related products to clients.

  • Restrict crypto-related advertisements.

  • Provide a safe, reliable and affordable public payment system adapted to the digital era.

  • Agree and implement global tax coordination regarding crypto assets.

  • Redesign capital controls to take account of the decentralized, borderless and pseudonymous features of cryptocurrencies.

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