An intergovernmental body of the United Nations (UN) established to promote the interest of developing countries is asking emerging markets to curb the adoption of crypto.
The United Nations Conference on Trade and Development (UNCTD) warns that the adoption of crypto in developing countries can jeopardize financial stability, domestic resource mobilization and the security of monetary systems.
“While these private digital currencies have rewarded some, and facilitate remittances, they are an unstable financial asset that can also bring social risks and costs.”
Citing the three policy briefs that it issued to delve into the growing popularity of digital assets and their risks, the body says that holding crypto can potentially result in financial losses.
The UNCTD says digital assets can also imperil the monetary sovereignty of countries once their use as a means of payment and as an unofficial domestic currency becomes more widespread, saying that stablecoins pose risks for developing countries, particularly those with unmet demands for reserve currencies.
“Given the risk of accentuating the digital divide in developing countries, UNCTAD urges authorities to maintain the issuance and distribution of cash.”
The UNCTD says that crypto can also enable tax evasion since owners of digital assets are 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 body then urges authorities to implement policy actions to curb the widespread adoption of crypto in developing countries.
These include regulating digital asset platforms, restricting crypto-related advertisements, rolling out digital payment systems, addressing tax policies for crypto and revamping capital controls to take into account the decentralized and pseudonymous nature of digital assets.
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