A recently released guidance note from the United Nations recommended that developing countries take action against crypto, warning of the risks associated with not regulating the industry.
In the document entitled “All that glitters is not gold”, first published in June, the United Nations Conference on Trade and Development (UNCTAD) said that the disadvantages posed to these nations by cryptocurrencies far outweigh the advantages they can bring to individuals and financial institutions. And the document goes so far as to suggest that developing countries require mandatory registration of all crypto wallets and prohibit advertisements related to cryptocurrencies.
“It’s not about approving or disapproving [of crypto] but emphasizing that there are social risks and costs associated with cryptocurrency,” said Penelope Hawkins, Economist and Senior Economic Affairs Officer at UNCTAD. Decrypt. “This is a recommendation that applies to all speculative or high-risk financial products with uncertain returns.”
The intergovernmental organization warned that cryptocurrencies could threaten the financial stability of developing countries, enable illicit financial activities, prevent authorities from limiting capital flows and also jeopardize the monetary sovereignty of nations by unofficially replacing the national currencies.
The brief recommended that governments “make the use of cryptocurrencies less attractive” by imposing taxes on transactions using the technology and requiring mandatory registration of digital wallets and cryptocurrency exchanges. He also floated the idea of banning financial institutions from holding digital assets and preventing them from offering crypto-related services to customers.
Developing countries should restrict or ban the advertising of crypto companies in public places or on social media platforms, the conference also proposed, saying it is an “urgent need in terms of consumer protection.” consumers in countries with low levels of financial literacy” which could lead to “significant losses,” according to the guidance note.
Rohan Grey, a law professor at Willamette University College of Law, has worked as a consultant for the United Nations on digital currencies and said the lack of regulation regarding cryptocurrencies has a documented history of harming consumers by allowing the fraud and scams.
“The ecosystem is not completely ripe and mature,” he said. Decrypt. “Allowing [the industry] Marketing yourself aggressively would be like having a new type of drug that hasn’t even gone through the FDA process claiming to solve cancer.
The final advice from the brief is for nations to develop their own payment systems that would serve as a public good, similar to how government-built infrastructure does, and explore the creation of a central bank digital currency (CBDC). ).
CBDCs are a digitized form of fiat currency issued by public monetary authorities. While some CBDCs work similarly to cryptocurrencies, they are issued by governments and their value is guaranteed by them. A few developing countries have already introduced CBDCs, such as the Bahamas, which calls its version the sand dollars.
“You don’t have to worry about the money itself ceasing to have value with CBDCs like you do with stablecoins,” Gray said. “Government-issued $1 can still be exchanged for government-issued $1.”
While he believes CBDCs have risks associated with them in terms of surveillance and censorship, he said the same concerns apply to stablecoins and the potential for default makes them a less favorable asset seeking the parity with fiat currencies against fiat currencies.
The report also references China’s efforts to establish a CBDC and mentions it as one of nine developing countries that have banned cryptocurrencies altogether. This list also includes Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia.
One of the reasons that prompted UNCTAD to publish the dossier is the growing adoption of cryptocurrencies across the world, which it says has been accelerated by the pandemic. The ease with which remittances could be sent drove people to the technology, the brief says, along with the idea that it could help protect household savings in times of currency depreciation and rises. of inflation.
“There is no one policy answer,” the conference said, while urging countries to take a forward-looking approach to implementing the regulations. “Doing too little or acting too late will lead to higher costs in the future.”
The UN has a the story to use digital assets to promote different initiatives. Earlier this year, the United Nations presented an NFT art collection titled Boss Beauty Role Models as part of International Women’s Day, which the organization has celebrated since 1975.
And in 2021, the UN supported a contest called DigitalArt4Climate, where participants created NFTs designed around the theme of climate change. The winner had their artwork displayed at the climate change conference in Scotland.
That same year, the United Nations International Children’s Fund (UNICEF) announced the launch of an NFT series on Ethereum to celebrate the agency’s 75-year history and raise funds for the giga initiativewhich facilitates fun Internet connections for schools around the world.
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