Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

UN trade body calls for halting cryptocurrency rise in developing countries

UN trade body calls for halting cryptocurrency rise in developing countries

The UN trade and development body, UNCTAD, has called for action to curb cryptocurrencies in developing nations, in three policy briefs published on Wednesday.

Although private digital currencies have rewarded some individuals and institutions, they are an unstable financial asset that can bring social risks and costs, the agency warned.

UNCTAD said their benefits to some are overshadowed by the threats they pose to financial stability, domestic resource mobilization, and the security of monetary systems.

Cryptocurrencies are an alternative form of payment. Transactions are done digitally through encrypted technology known as blockchain.

The use of cryptocurrency rose globally at an unprecedented rate during the COVID-19 pandemic, reinforcing a trend that was already in motion. Some 19,000 are currently in existence.

In 2021, developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns cryptocurrencies.

Ukraine topped the list with 12.7 per cent, followed by Russia and Venezuela, with 11.9 percent and 10.3 percent, respectively.

The first brief – All that glitters is not gold: The high cost of leaving cryptocurrencies unregulated – examines the reasons behind the rapid uptake of cryptocurrencies in developing countries, including facilitation of remittances and as a hedge against currency and inflation risks.

“Recent digital currency shocks in the market suggest that there are private risks to holding crypto, but if the central bank steps in to protect financial stability, then the problem becomes a public one,” UNCTAD said.

Furthermore, if cryptocurrencies continue to grow as a means of payment, and even replace domestic currencies unofficially, the “monetary sovereignty” of countries could be jeopardized.

UNCTAD also highlighted the particular risk that stablecoins pose in developing countries with unmet demand for reserve currencies. As their name implies, stablecoins are designed to maintain stability as their value is pegged to another currency, commodity or financial instrument.

“For some of these reasons, the International Monetary Fund has expressed the view that cryptocurrencies pose risks as legal tender,” the agency said.

The second policy brief focuses on the implications of cryptocurrencies for the stability and security of monetary systems, and to financial stability in general.

“It is argued that a domestic digital payment system that serves as a public good could fulfil at least some of the reasons for crypto use and limit the expansion of cryptocurrencies in developing countries,” said UNCTAD.

For example, monetary authorities could provide a central bank digital currency or a fast retail payment system, though measures will depend on national capacities and needs.

However, UNCTAD has urged governments “to maintain the issuance and distribution of cash”, given the risk of deepening the digital divide in developed countries.

Tax evasion fears


The final policy brief discusses how cryptocurrencies have become a new channel for undermining domestic resource mobilization in developing countries, and warns of the dangers of doing too little, too late.

While cryptocurrencies can facilitate remittances, UNCTAD warned that they may also enable tax evasion and avoidance through illicit financial flows – similar to a tax haven, where ownership is not easily identifiable.

“In this way, cryptocurrencies may also curb the effectiveness of capital controls, a key instrument for developing countries to preserve their policy space and macroeconomic stability,” the agency added.

UNCTAD has outlined several actions aimed at halting cryptocurrency expansion in developing countries.

The agency urged authorities to regulate crypto exchanges, digital wallets and decentralized finance to ensure the comprehensive financial regulation of cryptocurrencies.

Furthermore, regulated financial institutions should be banned from holding cryptocurrencies, including stablecoins, or offering related products to their clients.

Advertising related to cryptocurrencies also should be regulated, as is the case with other high-risk financial assets.

Governments are advised to provide a safe, reliable and affordable public payment system adapted to the digital era.

UNCTAD also advocates for global tax coordination regarding cryptocurrency tax treatments, regulation and information sharing.

Additionally, capital controls should be redesigned to take account of what the agency described as “the decentralized, borderless and pseudonymous features of cryptocurrencies”.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
The Country That Got Too Rich? Public Spending Dominates Norway Election
EU Proposes Phasing Out Russian Oil and Gas by End of 2027 to End Energy Dependence
More Than 150,000 Followers for a Fictional Character: The New Influencers Are AI Creations
EU Prepares for War
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
×