United Nations: crypto poses risk to emerging countries

Governments may find the principle of a highly traceable blockchain very interesting or even ideal, but they do not like the monetary aspects of cryptocurrencies. In fact, a United Nations think tank thinks the crypto market is still in a bubble.

Emerging economies extra vulnerable to crypto

That writes the United Nations Conference on Trade and Development (UNCTAD) in a four page report. “All that glitters is not gold”, emphasizes the UN organization. The benefits cryptocurrencies provide for some individuals and institutions are overshadowed by the risks and costs, according to the think tank.

This would especially apply to developing countries, because the adoption rate of private cryptocurrencies is very high in these countries. The pandemic has accelerated that exponentially over the past few years. These emerging economies have a less strong financial system and a less strong currency. That can pose risks for monetary sovereignty, policy and macroeconomic stability.

Many countries are already experiencing the risks of a lack of monetary stability. That would be because many residents of these countries sometimes prefer to use crypto over the national currency and the associated payment system.

By November 2021, according to the research, banks and other financial institutions were already banned in 41 countries from offering crypto services, or exchanges were not allowed to sell tokens to individuals and companies. Nine countries have even banned crypto altogether. These are Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia.

Crypto adoption highest in Ukraine and Russia

The report also explains in which countries the adoption is highest. Ukraine leads the way, where, not unexpectedly, 12.7% of the population invests in crypto. In Russia this is 11.9%. In Venezuela, long plagued by hyperinflation, 10.3% of the population relies on the asset class. Most of the graph is red. These are developing economies. Only five of the twenty countries in the list are developed countries, which are generally much stronger financially.

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Many of the countries with the highest adoption rates are less affluent. Source: UNCTAD

The organization advocates for limiting advertising for crypto assets, regulating the industry and for a “modern, reliable and affordable payment system for the public sector.” By the latter, it means a Central Bank Digital Currency (CBDC) or a fast payment system for the retail market.

It is no secret that these kinds of government organizations are not directly in favor of crypto. Recently, the International Monetary Fund (IMF) was in the crypto news because stablecoins started to cause more pain.

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