Africa: UN Trade Body Calls for Halting Cryptocurrency Rise in Developing Countries

In three policy briefs released on, UNCTAD, the UN agency for trade and development, urged action to prevent the use of cryptocurrencies in developing countries.

Private digital currencies have benefited certain people and organizations. The hazards they represent to monetary system security, domestic resource mobilization, and financial stability outweigh whatever benefits they may have for some people, according to UNCTAD.

Rise of crypto
Using cryptocurrencies as payment is an option. Digital transactions are carried out using the block chain encryption technology. During the COVID-19 epidemic, the use of cryptocurrencies increased at a previously unheard-of rate on a worldwide scale, accelerating a trend that was already underway. There are currently about 19,000 of them.

Not so golden
The first brief addresses the factors that have contributed to cryptocurrencies’ quick adoption in poor nations, including the ease of remittances and their use as a safeguard against exchange rate and inflation threats.

Additionally, if cryptocurrencies keep expanding as a form of payment and even informally take the place of national currencies, “monetary sovereignty” of nations may be under risk.

The second policy brief focuses on how cryptocurrencies may affect the security and reliability of monetary systems as well as overall financial stability.

Tax evasion fears
The last policy brief examines how cryptocurrencies have evolved into a new avenue for undermining domestic resource mobilization in developing nations and cautions against acting prematurely.

While cryptocurrencies can make remittances easier, UNCTAD cautioned that they may also make it easier for people to evade and avoid paying taxes through shady financial transactions, much like a tax haven whose ownership is difficult to trace.

Curbing crypto
Several initiatives have been proposed by UNCTAD to stop the growth of cryptocurrencies in developing nations. To achieve complete financial regulation of cryptocurrencies, the agency asked authorities to regulate crypto exchanges, digital wallets, and decentralized finance. Furthermore, it should be illegal for regulated financial institutions to possess cryptocurrencies, including stable coins, or to provide their clients with services or goods that are associated to them.

Cryptocurrency-related advertising has to be regulated, just like other high-risk financial assets do.

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