The United Nations Conference on Trade and Development (UNCTD) issued policy briefings and recommendations to discourage crypto adoption in developing countries.
The UNCTD released a brief on Aug. 10, in which it argued that unregulated crypto adoption possess a threat to developing countries. It, however, acknowledged crypto’s role in facilitating remittances and as a hedge against currency inflation.
According to the brief, the agency’s concerns about crypto relate to the financial stability, resource mobilization, and security of monetary systems of developing countries.
The UN Agency reiterated the stance of the International Monetary Fund (IMF) on the risks of adopting crypto as a legal tender. It stated that recent market conditions have proved that cryptocurrencies, especially stablecoins, could undermine the financial stability of developing countries.
If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoization), this could jeopardize the monetary sovereignty of countries.
To protect consumers in developing countries, the UNCTD recommends that a comprehensive regulation on cryptocurrencies be implemented, as well as restricting advertisements related to cryptocurrencies.
A second issue raised, concerns the development of domestic digital payment systems. It stated that failure to do so could lead to a rise in capital outflow from the real economy into the crypto economy which could undermine the monetary stability of countries.
As a recommendation, the agency urged authorities to consider developing a local central bank digital currency (CBDC).
Depending on national capabilities and needs, monetary authorities could provide a central bank digital currency or, more readily, a fast retail payment system.
The UNCTD finally argued that a rise in crypto adoption would affect resource mobilization for developing countries since tax evasion is easier with crypto transactions.
While cryptocurrencies can facilitate remittances, they may also enable tax evasion and avoidance through illicit…