PanamaTimes

Thursday, May 30, 2024

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”.

Newsletter

Related Articles

PanamaTimes
0:00
0:00
Close
El Salvador's Bitcoin Holdings Reach $350 Million
Teens Forming Friendships with AI Chatbots
WhatsApp Rolls Out Major Redesign
Neuralink's First Brain Implant Experiences Issue
Apple Unveils New iPad Pro with M4 Chip, Misleading AI Claims
OpenAI to Announce Google Search Competitor
Apple Apologizes for Controversial iPad Pro Ad Featuring Instrument Destruction
German politician of the AFD party, Marie-Thérèse Kaiser was just convicted & fined $6,000+
Changpeng Zhao Sentenced to Four Months in Jail
Biden Administration to Relax Marijuana Regulations
101-Year-Old Woman Mistaken for a Baby by American Airlines: Comical Mix-Up during Flight Check-in
King Charles and Camilla enjoying the Inuit voice singing performance in Canada.
New Study: Vaping May Lower Fertility in Women Trying to Get Pregnant
U.S. DOJ Seeks Three-Year Sentence for Binance Founder Changpeng Zhao
Headlines - Thursday, 23 April 2024
Illinois Woman Wins $45M Lawsuit Against Johnson & Johnson and Kenvue for Mesothelioma Linked to Baby Powder
Panama's lates news for Friday, April 19
Creative menu of a Pizza restaurant..
You can be a very successful player, but a player with character is another level!
Experience the Future of Dining: My Visit to an AI-Powered Burger Joint
Stabbing rampage terror attack in Sydney, at least four people killed, early reports that a baby was among those stabbed.
Iran fired more than 300 drones and missiles at Israel overnight. Israel Reports Light Damage After Iran Launches Large Strike.
I will never get enough of his videos and the pure joy and beauty of these women!!
Scientists at the University of Maryland have developed an "invisibility cloak", for AI using adversarial patterns on a sweater, making the wearer nearly undetectable to standard object detection methods.
Lamborghini Bids Farewell to Its Best-Selling Sports Car: The Huracán
Sam Bankman-Fried Appeals 25-Year Prison Sentence for $8bn FTX Fraud
OJ Simpson, ex-NFL star who was acquitted of murder, dies aged 76
British Backpacker Imprisoned in Notorious Bolivian Prison: Family Raises Funds for Legal Fight and Essentials
Argentina: Venezuela Cuts Power to Embassy after Opposition Meeting
El Salvador Offers 5,000 Passports to Skilled Foreign Workers: Tax-Free Relocation and Citizenship
Panama Papers Trial Begins: Founders of Mossack Fonseca Face Money-Laundering Charges
75 Becomes the New 65: Retiring in Your 60s Unrealistic as Life Expectancy Increases and Costs Rise
Total Solar Eclipse of 2021: 32 Million Witness the Mystical, $1.5bn Spectacle Sweep Across North America
New shopping experience…
New world, new reality, let’s get used to it
UK Company Passes Milestone in Developing Space-Based Solar Power, Aiming to Power a Million Homes and Provide Constant Energy
Mexico Breaks Diplomatic Ties with Ecuador after Police Storm Embassy, Arrest Former Vice President
Monty Python were so ahead of their time
If there's a will, there's a way!
Rules about how to dress are important, but not so much if you have a lot of money.
Body Armor Firm Showcases Stab-Proof Vest in Demo on CEO
Mexico Cuts Diplomatic Ties with Ecuador After Embassy Stormed in Quito
Here is a tattoo idea, for engineers
Zoraya Ter Beek, a 28-year-old woman from the Netherlands, will undergo euthanasia in May due to severe mental health challenges
Here's a video featuring Fidel Castro, where he discusses his stance against war and his commitment to preserving life, positions that have put him at odds with the USA:
Woman reaches behind and steals gun from a security guard and shoots three people while getting detained in Chile
Take a walk around the safe and thriving downtown San Salvador.
Joe Biden criticised by Trump campaign for declaring Transgender Day of Visibility on Easter Sunday
Macron says France will help Brazil develop nuclear-powered submarines
A video demonstrating women's self defense class in 1930
×