UN Trade Agency Pushes To Curb Cryptocurrency Rise In Developing Countries

The UN trade and development body, United Nations Conference on Trade and Development UNCTAD, has called for action to curb cryptocurrencies in developing nations, in three policy briefs published on Wednesday.

Although private digital currencies have rewarded some individuals and institutions, they are an unstable financial asset that can bring social risks and costs, the agency warned.

UNCTAD said their benefits to some are overshadowed by the threats they pose to financial stability, domestic resource mobilization, and the security of monetary systems.

Cryptocurrencies are an alternative form of payment. Transactions are done digitally through encrypted technology known as blockchain.

The use of cryptocurrency rose globally at an unprecedented rate during the COVID-19 pandemic, reinforcing a trend that was already in motion. Some 19,000 are currently in existence.

In 2021, developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns cryptocurrencies.

Ukraine topped the list with 12.7 per cent, followed by Russia and Venezuela, with 11.9 per cent and 10.3 per cent, respectively.

“Recent digital currency shocks in the market suggest that there are private risks to holding crypto, but if the central bank steps in to protect financial stability, then the problem becomes a public one,” UNCTAD said.

Furthermore, if cryptocurrencies continue to grow as a means of payment, and even replace domestic currencies unofficially, the “monetary sovereignty” of countries could be jeopardized.