A United Nations trade body has recommended a set of policy actions to “curb the expansion of cryptocurrencies in developing countries.” The intergovernmental group stressed that if cryptocurrencies become a widespread means of payment, it could jeopardize the monetary sovereignty of countries.
UN Trade Body’s Crypto Policy Recommendations
Last week, UNCTAD (United Nations Conference on Trade and Development) called on authorities worldwide in order to combat the spread of crypto currencies.
UNCTAD (Universal Council for Trade and Development) is an intergovernmental permanent body that was established by the United Nations General Assembly on 24 April 1964. It forms part of U.N. Secretariat. It reports to the U.N. General Assembly and Economic and Social Council. According to its website, UNCTAD boasts 195 member countries and 204 projects spread across 70 nations.
“Global use of cryptocurrencies has increased exponentially during the Covid-19 pandemic, including in developing countries,” the group noted. “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.”
Details about the intergovernmental organization:
The monetary sovereignty and independence of countries could be threatened if cryptocurrencies are widely accepted as a means to pay or even substitute for domestic currency (a process called Cryptoization).
“While cryptocurrencies can facilitate remittances, they may also enable tax evasion and avoidance through illicit flows, just as if to a tax haven where ownership is not easily identifiable,” UNCTAD described. “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.”
According to the trade organization, it had published three policy briefs. On June 13, the first brief outlined the high cost associated with leaving cryptocurrencies unregulated. The second, published on June 22, focuses on public payment systems to address the financial stability issues and security threats posed by cryptocurrencies. A third short, which was published Aug. 10, examines how cryptocurrency can hinder domestic resource mobilization within developing countries.
El Salvador has accepted bitcoin as legal tender, despite warnings from International Monetary Fund. El Salvador has already purchased 2,381 Bitcoins in order to maintain its Treasury since September 2017, when BTC was legal.
UNCTAD has recommended a set of policy actions, stating that it “urges authorities to take the following actions to curb the expansion of cryptocurrencies in developing countries.”
The first recommendation is to “Ensure comprehensive financial regulation of cryptocurrencies through regulating crypto exchanges, digital wallets, and decentralized finance, and banning regulated financial institutions from holding cryptocurrencies (including stablecoins) or offering related products to clients.”
Secondly, authorities should “Restrict advertisements related to cryptocurrencies,” “Provide a safe, reliable, and affordable public payment system adapted to the digital era,” and “Agree and implement global tax coordination regarding cryptocurrency tax treatments, regulation, and information sharing.” The last recommendation urges authorities to:
Capital controls should be redesigned to account for the pseudonymous, decentralized and borderless nature of cryptocurrency.
Do you agree with the U.N. trade body’s call for authorities in the developing world to reduce the spread of crypto currencies? Comment below.
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