UNCTAD spells out actions to curb cryptocurrencies in developing countries

UNCTAD emphasizes the risks of cryptocurrencies in developing countries due to their instability and social implications. The organization recommends actions such as comprehensive financial regulation, restricting crypto-related advertisements, developing a secure public payment system, coordinating global tax policies, and adapting capital controls to the unique characteristics of cryptocurrencies.

While the global use of cryptocurrencies has increased exponentially during the COVID-19 pandemic where private digital currencies have rewarded some, and facilitate remittances, cryptocurrencies are an unstable financial asset that can also bring social risks and costs. To address these needs, the UN Conference on Trade and Development (UNCTAD) has issued three policy briefs that delve into these risks and costs, including the threats cryptocurrencies bring to financial stability, domestic resource mobilisation, and the security of monetary systems. In these papers, UNCTAD urges authorities to take the following actions to curb the expansion of cryptocurrencies in developing countries:

  • Ensure comprehensive financial regulation of cryptocurrencies through regulating crypto exchanges, digital wallets, and decentralised finance, and banning regulated financial institutions from holding cryptocurrencies (including stablecoins) or offering related products to clients.
  • Restrict advertisements related to cryptocurrencies, as for other high-risk financial assets.
  • Provide a safe, reliable and affordable public payment system adapted to the digital era.
  • Agree and implement global tax coordination regarding cryptocurrency tax treatments, regulation, and information sharing.
  • Redesign capital controls to take account of the decentralized, borderless, and pseudonymous features of cryptocurrencies.