The UN Trade and Development Body, UNCTAD, has called to curb the rise of cryptocurrency in developing countries, calling them unstable financial assets that cause unforeseeable risks and costs. The three newly-released policy briefs examined the risks and costs of cryptocurrencies, including the threats cryptocurrencies bring to financial stability, domestic resource mobilisation and the security of monetary systems. The document titled ‘All that glitters is not gold’ suggests that developing nations require the mandatory registration of crypto wallets and ban advertisements related to cryptocurrencies. Cryptocurrencies have gained popularity over the last decade. However, this digital form of payment remains concentrated among a niche of investors. While the statement is an advisory to developing countries, the trade body actively warns ’developing nations’ about the risk of dealing with unregulated payment mechanisms.
In 2021, developing countries accounted for 15 of the top 20 crypto-economies, with Ukraine topping the list with 12.7 per cent, followed by Russia and Venezuela. In 2021, Nigeria had the highest crypto adoption out of the 880% global crypto growth for the year. The primary reason why the unregulated use of cryptocurrencies is called to be regulated is due to the threat it poses to the monetary sovereignty of nations. Interestingly, the warning is exclusive to developing countries when most developed nations, such as the EU, have tumbled to parity against the American dollar. Decision-makers must note that cryptocurrencies are universal, often internally regulated through blockchains that have often proven to be more transparent than traditional monetary systems. The Central African Republic has approved Bitcoin as a legal tender. However, the UNCTD does not discredit the use of cryptocurrencies in totem. The trade body acknowledged the role of cryptocurrencies in facilitating remittance and as a hedge against currency inflation. The United Nations has a history of promoting digital currencies. In 2022, the international Organization displayed an NFT art collection called Boss Beauty Role Models as part of International Women’s Day.
The warning calls for developing nations to regulate cryptocurrencies through Central Bank Digital Currencies and the registration of cryptocurrencies. While these recommendations are reasonable to prevent fraud and risk in a niche that, irrespective of its popularity, is still largely oblivious to most of the population. However, the financial risk of cryptocurrencies is universal. Many developed nations have already benefitted from them. Cryptocurrencies can accelerate the development process as new technologies and innovations are critical solutions for the catch-up process of developing countries. Cryptocurrencies could provide a significant benefit by overcoming the lack of social trust and by increasing access to financial services as they can be considered as a medium to support the growth process in developing countries by increasing financial inclusion, providing better traceability of funds and helping people to escape poverty.
The UN Trade Agency also warned about the use of Cryptocurrency in evading taxes. Interestingly, most tax evasions are carried out by individuals from developed nations who exploit developing nations and their relaxed tax rules. The UN Trade Agency must also look into and pay attention to how investors in developed nations have used cryptocurrencies illegally. The U.S Government possesses massive stockpiles of bitcoins that have been seized, primarily from the illegal dark web site Silk Road, attesting to foul play even in developed nations. In fact, transactions on blockchains are visible to all and thus traceable. Forensic tools increasingly available to law enforcement as well as crypto-enterprises can potentially detect and stop proposed transactions on a real-time basis.
These recommendations, especially relating to the ban on advertisements, if adopted, are sure to curb the popularity of cryptocurrency and have a negative effect on the development of these nations. If the agenda was to protect nations from financial instability alone, the Trade body should have alerted all nations equally. While different economies may handle instability differently based on their economic power, these recommendations further divide the gap between developing and developed nations. An ideal recommendation would have been to advertise cryptocurrency and how to invest and trade in it safely so that more developing countries can use this to assist in growth. Cryptocurrencies are generally not politically supported because of the fear of fraud and of losing control over economic policies such as monetary policy. The same agenda is reflected in the UN Trade body’s recommendations. The true potential of cryptocurrency can only be realised by mass adoption. Mass adoption will also lead to better regulation. The UN Trade Body’s suggestion points in the opposite direction, or more likely, an effort to exclude developing nations from catching up with the developed countries.
References
UNCTAD Spells Out Actions to Curb Cryptocurrencies In Developing Countries (2022, August 10) UNCTAD. Retrieved on 12 August 2022 https://unctad.org/news/unctad-spells-out-actions-curb-cryptocurrencies-developing-countries
Nwobodo C., UN Agency Wants Comprehensive Crypto Regulation in Developing Countries (2022, August 11) Cryptoslate Retrieved on August 15, 2022
Sander P., The Impact of Crypto Currencies on Developing Countries (2020, January 21) Retrieved on August 13, 2022, https://philippsandner.medium.com/the-impact-of-crypto-currencies-on-developing-countries-dce44c529d6b
UN trade body calls for halting cryptocurrency rise in developing countries (2022, August 12), Modern Diplomacy Retrieved on 15 August 2022https://moderndiplomacy.eu/2022/08/12/un-trade-body-calls-for-halting-cryptocurrency-rise-in-developing-countries/
Hammod S., Special Report: Cryptos on the Rise (2021, June 24 ) Thomson Reuters, Retrieved on 14 August 2022
https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/crypto-special-report/
DeWaal G, Crypto Misuse—Evading Russian Sanctions Can Be Detected, Prosecuted (2022, March 15) Bloomberg Law. Retrieved on 14 August 2022 https://news.bloomberglaw.com/us-law-week/crypto-misuse-evading-russian-sanctions-can-be-detected-prosecuted
By The European Institute for International Law and International Relations.
