The United Nations Conference on Trade and Development recently published a report on the dangers of unregulated cryptocurrencies, recommending that low and middle-income countries prohibit all advertisements for cryptocurrencies and regulate them.
Learn how smart money is playing the game of criptocurrency.
The arrival of digital currencies during the epidemic has resulted in risks for monetary sovereignty, macroeconomic stability, and public policy, according to the UN report.
The UN report said that the use of cryptocurrencies could lead to financial instability risks. If prices fall, monetary authorities may need to step in to restore financial stability. In developing countries, the use of cryptocurrencies provides a new channel for illicit financial flows. The UN report highlighted that stable coin posed the highest risk for developing countries, where there is unmet demand for reserve currencies. Stablecoins are cryptocurrencies that are pegged 1 to 1 with a stable asset like the U.S. dollar or gold.
The adoption of cryptocurrencies in the Global South has been particularly acute in recent years, according to the report. There was a 2,300% growth in cryptocurrencies from 2019 to 2021, with the top 15 countries for adoption last year being low and middle-income countries.
The report recommended several items, including 1 mandatory registration of wallets and exchanges, 2 the imposition of cost-prohibitive fees and taxes on criptocurrencies and 3 the prohibition of stable coin sales by banks and traditional financial institutions to minimize the risks to emerging economies.
As the United Kingdom has moved to do, it exhorted countries to ban cryptocurrencies on social media and in public arenas like buses. The report said that policymakers must expand the scope of regulation beyond traditional media to be able to participate in this new kind of disguised advertising. There is an urgent need for consumer protection in countries with low levels of financial literacy, as exposure to cryptocurrencies can lead to significant losses. The UN Conference on Trade and DevelopmentUN Conference on Trade and Development report also highlighted the benefits of creating a central bank digital currency to function as a public good.