UN agency wants comprehensive regulation of crypto in developing countries

The United Nations Conference on Trade and Development (UNCTD) has released policy briefs and recommendations to discourage the adoption of cryptography in developing countries.

UNCTD has published a note on August 10, in which he argued that the unregulated adoption of cryptography posed a threat to developing countries. He, however, acknowledged the role of crypto in facilitating remittances and as a hedge against monetary inflation.

According to the brief, the agency’s concerns with crypto relate to financial stability, resource mobilization, and the security of monetary systems in developing countries.

The UN agency reiterated the position of the International Monetary Fund (IMF) on the risks of adopting crypto as legal tender. He said recent market conditions have proven that cryptocurrencies, especially stablecoins, can undermine the financial stability of developing countries.

If cryptocurrencies become a widespread means of payment and even unofficially replace national currencies (a process called cryptography), it could jeopardize the monetary sovereignty of countries.

To protect consumers in developing countries, the UNCTD recommends comprehensive cryptocurrency regulation, as well as the restriction of cryptocurrency-related advertising.

A second question raised concerns the development of national digital payment systems. He said failure to do so could lead to an increase in capital outflows from the real economy to the crypto-economy, which could undermine countries’ monetary stability.

As a recommendation, the agency urged the authorities to consider developing a central bank digital currency (CBDC).

Depending on national capacities and needs, monetary authorities could provide a central bank digital currency or, more easily, a rapid retail payment system.

UNCTD ultimately argued that an increase in crypto adoption would affect resource mobilization for developing countries, as tax evasion is easier with crypto transactions.

While cryptocurrencies can facilitate remittances, they can also enable tax evasion and evasion through illicit flows, as if heading for a tax haven where ownership is not easily identifiable.

To combat tax evasion using cryptocurrencies, the agency recommends a coordinated global effort among relevant authorities to implement appropriate tax laws for the crypto industry.

Developing countries relentless in adopting crypto

In 2021, Nigeria recorded the highest crypto adoption out of the global crypto growth of 880% for the year.

The Central African Republic (CAR) has become the first African country to adopt Bitcoin as a legal tender April 27. It bolstered its crypto adoption efforts by launching “Project Sango,” with its native Sango Coin sale going live on July 25.