The UN has published a document recommending that developing countries limit or completely abandon the advertising and use of cryptocurrencies. According to the authors, the widespread use of such assets can destabilize an already underdeveloped economy. Let’s see if this is the case.
UNCTAD has published a white paper titled All That Glitters Is Not Gold: The High Price of Unregulated Cryptocurrencies. Here it was suggested that some developing countries have decided to actively use cryptocurrencies to attract additional investors and increase their budgets.
This decision is because the growth of cryptocurrencies in the last few yeRohan Grayars has been tremendous, and many companies have made huge money from this. Fascinated by such success, governments of different countries are beginning to use cryptocurrencies actively, create their digital currencies, and equate them to fiat ones.
The authors of the above document say that cryptocurrencies are not a panacea for all financial ills. The use of such assets is always associated with a large number of risks since the value of currencies is not fixed. So, crypto companies that invested in the purchase of Bitcoin in the winter are declaring bankruptcy today, laying off half of the staff and suffering huge losses.
That is why the UN calls on developing countries to oblige all crypto exchanges and wallets to be registered. It will ensure they are not fraudsters and replenish the state treasury with additional taxes. A good solution would be to impose a tax on each crypto transaction or to prohibit financial institutions from holding digital assets and offering customers any services related to crypto assets.
According to Rohan Gray, who advises the UN on digital currencies, the lack of regulation of the crypto industry can lead to many scammers.
If developing countries seek to use cryptocurrencies, it is better to create their payment system and stablecoins. In this case, they will be able to maintain a stable price of assets, and the level of risks here is much lower. In addition, this will ensure perfect control over all transactions.
How good are these tips?
The crypto industry is developing at a tremendous speed today, so banning the use of crypto assets will not solve the problem. Exchanges and wallets will go into the shadows and continue to function.
However, if developing countries can create a legal framework to regulate them, it could be useful. So, they can oblige all crypto companies to be licensed and pay taxes and provide them with various benefits or the ability to advertise.
In addition, it is necessary to conduct consultations for the population to discuss the pros and cons of using digital assets. Financial education in these countries is often inferior, so the better the government can explain all the risks.
It is worth saying that interest in crypto assets among developing countries is overgrowing. So for example, the number of crypto holders in African countries in 2021 increased by 1200% compared to the previous year. People here do not trust the state financial systems, so they keep money in cryptocurrency to secure a comfortable old age or save money for their children’s education. As a result, due to the onset of the crypto winter, their savings may be reduced several times.