The United Nations Conference on Trade and Development (UNCTAD) proposed restrictions on cryptocurrencies in developing economies in a series of policy documents that were released on August 10.
Virtual currencies complicate national regulatory procedures
Private virtual currencies all throughout the world complicate national regulatory procedures, according to UNCTAD, a division of the UN Secretariat. Although some individuals have profited from cryptocurrencies, they are still speculative financial instruments that have the potential to be harmful to society as a whole.
Three policy briefs released by UNCTAD go in-depth on the costs and risks connected with cryptocurrencies, especially the threats they present to economic stability, the utilization of domestic assets, and the security of monetary systems.
Claims That Cryptocurrencies Are Dangerous
According to UNCTAD, capital regulations, which are widely implemented in developing countries to ensure fiscal sustainability, may become less effective as a result of cryptocurrencies.
While cryptos can facilitate remittances, UNCTAD issued a warning that they may also facilitate tax evasion through unauthorized financial activities, much like a tax haven whose ownership is challenging to track.
Stablecoins present special issues in developing countries because there is a great demand for reserve currencies, according to UNCTAD. The International Monetary Fund has also expressed concern about the risks that cryptocurrencies as legal tender may present.
UNCTAD suggested new regulations
Regulating cryptocurrency exchanges, digital wallets, and decentralized finance was suggested by UNCTAD. Furthermore, it’s possible that financial institutions won’t be permitted to store cryptocurrencies and stablecoins or offer auxiliary services.
Additionally, the authorities pushed for international coordination between cryptocurrency-related regulatory, information sharing, and taxing entities, as well as restrictions on cryptocurrency advertising. Finally, it suggested modifying capital restrictions to take into consideration cryptocurrencies’ global, decentralized, and pseudonymous nature.
On the flip side, cryptocurrencies need political goodwill if the central banks and government control the money supply. This is likely to reduce the benefits cryptos have. Currently, cryptos back the growth process of developing economies in limited ways. The implementation of rules, the resulting price stability, and the uptake of cryptocurrencies all have a significant impact on future development.