UN calls

Measures must be taken to curb the growth of cryptocurrencies in developing countries, the UN organization said, given that these currencies are “an unstable financial asset that may entail social risks and costs.”

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“While private digital currencies have enriched some people and institutions, they are a volatile financial asset that can carry social risks and costs,” UNCTAD, the United Nations trade and development body, warned in three guidance notes released this Wednesday. , August 10.

According to UNCTAD, the benefits of cryptocurrencies for 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 carried out digitally using an encrypted technology known as blockchain. The use of cryptocurrencies around the world has grown at an unprecedented pace during the COVID-19 pandemic, reinforcing an already emerging trend. There are currently about 19,000 of them.

In 2021, among the 20 countries with the highest share of the population owning cryptocurrencies, 15 were developing countries.

In the first report of the UN agency entitled “All that glitters is not gold. Not Regulating Cryptocurrencies Is Very Expensive” examines the reasons for the rapid adoption of cryptocurrencies in developing countries, including facilitating money transfers and protecting fiat currencies from inflation.

“The recent turmoil in the digital currency market suggests that it is risky to hold cryptocurrencies. If the central bank intervenes to protect their financial stability, then the issue becomes public,” UNCTAD said.

In addition, if cryptocurrencies continue to develop as a means of payment, even as an unofficial replacement for national currencies, then the “monetary sovereignty” of countries may be at risk, the UN agency warned.

The second UNCTAD note focuses on the impact of cryptocurrencies on the stability and security of monetary systems, as well as on the stability of the financial architecture in general. “A national digital payment system for public services should eliminate at least some of the reasons for the use of cryptocurrencies and limit the spread of cryptocurrencies in developing countries,” UNCTAD noted.

The latest policy brief looks at how cryptocurrencies have become a new channel to undermine domestic resource mobilization in developing countries and warns of the dangers of doing “too little too late.”

Indeed, while cryptocurrencies may facilitate remittances, UNCTAD has warned that they “may also facilitate fraud and tax evasion through illicit financial flows – like a fiscal haven where it is difficult to determine who owns what.”

“Thus, cryptocurrencies may also impede the effectiveness of capital controls, a key tool for developing countries to maintain room for maneuver and their macroeconomic stability,” the UN agency further notes.



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