The United Nations believes that crypto could pose a threat to the monetary sovereignty of developing countries. It therefore recommends strict rules to limit its use.
Regulate crypto
In a recently published policy letter, the United Nations advised developing countries to take action against crypto. The UN warned of risks associated with leaving the crypto industry unregulated.
In the document titled “All that glitter is not goldFirst published in June, the United Nations Conference on Trade and Development (UNCTAD) stated that the drawbacks cryptocurrencies pose to these countries far outweigh the benefits they can bring to individuals and financial institutions. . The document even suggests that developing countries should institute mandatory registration of all crypto wallets. In addition, it demands that advertisements related to cryptocurrencies should be banned.
“This is not about approving or disapproving crypto. It is about the social risks and costs associated with cryptocurrencies. This is a recommendation that applies to speculative or risky financial products whose returns are uncertain.
– Says Penelope Hawkins, economist at UNCTAD.
The organization also warned that cryptocurrencies could harm the financial stability of developing countries. In addition, cryptocurrencies can enable illicit financial activities, prevent authorities from restricting capital flow, and jeopardize countries’ monetary sovereignty by replacing domestic currencies.
“Make cryptocurrencies less attractive by taxing”
The letter advised governments to make the use of cryptocurrencies less attractive by levying taxes on transactions that use the technology. In addition, it recommended requiring mandatory registration of digital wallets and cryptocurrency exchanges. It also put forward the idea of banning financial institutions from holding digital assets. In addition, they want to prevent financial institutions from offering crypto-related services to customers.
Developing countries should restrict or prohibit advertising of crypto companies in public places or on social media platforms. So the conference also suggested, claiming it is an urgent consumer protection need in countries with low financial literacy. “These ads could lead to significant losses.” According to the letter
Rolling out CBDCs
Rohan Grey, a law professor at Willamette University College of Law, has worked as a consultant to the United Nations on digital currencies. He said the lack of regulation regarding cryptocurrencies has hurt consumers by enabling fraud and scams.
The letter’s final advice is that countries should develop their own payment systems. This should be done in much the same way as the infrastructure built by the government. In addition, they should explore the possibilities of a central bank digital currency (CBDC).
CBDCs are a digitized form of fiat money issued by public monetary authorities. While some CBDCs work in the same way as cryptocurrencies, they are issued by governments and their value is backed by them. A few developing countries have already introduced CBDCs, such as the Bahamas, calling their version the Sand Dollar.
“You don’t have to worry that the money itself has no value anymore, like you do with stablecoins. $1 spent by the government can always be exchanged for $1 spent by the government.”
– Says Gray
While he believes that CBDCs pose risks in terms of oversight and censorship, he said the same concerns apply to stablecoins.
The report also references China’s efforts to create a CBDC as well. China is one of nine developing countries that have banned cryptocurrencies. That list also includes Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia.
The increasing adoption of cryptocurrencies and NFTs
One of the reasons that prompted UNCTAD to release the letter is the increasing adoption of cryptocurrencies around the world. This widespread adoption was accelerated by the pandemic. The ease with which money transfers could be sent drove people to the technology, the letter said. As well as the idea that it could help safeguard household savings in times of currency depreciation and rising inflation.
There is no uniform policy response. Doing too little or intervening too late will lead to higher costs in the future.
– According to the conference
However, it urged countries to take a forward-looking approach when introducing regulations.
In the past, the United Nations used digital means to promote various initiatives. Earlier this year, the United Nations released an NFT art collection called Boss Beauty Role Models. This was part of International Women’s Day, which the organization has been celebrating since 1975.
In 2021, the UN supported a competition called DigitalArt4Climate, where participants created NFTs designed around the theme of climate change. The winner was allowed to exhibit his works of art during the climate conference in Scotland.
That same year, UNICEF announced the launch of an NFT series on Ethereum to celebrate its 75-year history. In addition, the intention was to raise money for the Giga initiative, which provides internet connections between schools around the world.