UN Agency wants comprehensive crypto regulation in developing countries
The United Nations Conference on Trade and Development (UNCTD) presented policy issues and recommendations to check the fast pace of crypto adoption in developing countries.
The United Nations Conference on Trade and Development (UNCTD) issued policy briefings and recommendations to discourage crypto adoption in developing countries.
The UNCTD released a brief on Aug. 10, in which it argued that unregulated crypto adoption possess a threat to developing countries. It, however, acknowledged crypto’s role in facilitating remittances and as a hedge against currency inflation.
According to the brief, the agency’s concerns about crypto relate to the financial stability, resource mobilization, and security of monetary systems of developing countries.
The UN Agency reiterated the stance of the International Monetary Fund (IMF) on the risks of adopting crypto as a legal tender. It stated that recent market conditions have proved that cryptocurrencies, especially stablecoins, could undermine the financial stability of developing countries.
If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoization), this could jeopardize the monetary sovereignty of countries.
To protect consumers in developing countries, the UNCTD recommends that a comprehensive regulation on cryptocurrencies be implemented, as well as restricting advertisements related to cryptocurrencies.
A second issue raised, concerns the development of domestic digital payment systems. It stated that failure to do so could lead to a rise in capital outflow from the real economy into the crypto economy which could undermine the monetary stability of countries.
As a recommendation, the agency urged authorities to consider developing a local central bank digital currency (CBDC).
Depending on national capabilities and needs, monetary authorities could provide a central bank digital currency or, more readily, a fast retail payment system.
The UNCTD finally argued that a rise in crypto adoption would affect resource mobilization for developing countries since tax evasion is easier with crypto transactions.
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.
To curb tax evasion using cryptocurrencies, the agency recommends a global coordinated effort among relevant authorities to implement appropriated taxation laws for the crypto industry.
Developing countries relentless in crypto adoption
In 2021, Nigeria had the highest crypto adoption out of the 880% global crypto growth for the year.
The Central African Republic (CAR) became the first African country to adopt Bitcoin as a legal tender on April 27. It strengthened its crypto adoption efforts by launching “Project Sango,” with its native Sango Coin sale going live on July 25.