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Developing countries must take steps to regulate cryptocurrencies, says UN

The United Nations Conference on Trade and Development (Unctad) notes that the global reach of cryptocurrencies makes a national regulatory response “challenging”, but argues that developing countries have options for dealing with the issue.

Unctad notes that these private digital currencies “have rewarded some, and facilitated remittances”, but also “are an unstable financial asset, which can bring risks and social costs”.

In text on its website, Unctad has a chart that lists countries according to the share of their populations that hold digital currencies.

At war, Ukraine leads the list with 12.7%, followed by its rival in the conflict, Russia, with 11.9%.

In third comes Venezuela, with 10.3%, which faces a long history of economic problems and important restrictions.

Next are Singapore (9.4%), Kenya (8.5%), United States (8.3%), India (7.3%) and South Africa (7.1%). Brazil appears in 14th place, with 4.9%.

The list of 20 countries has 15 developing economies.

Unctad recalls that it has already published reports on these risks and costs, including threats to financial stability and the security of monetary systems.

It says recent shocks to digital currencies suggest there are private risks in holding these assets, “but if the central bank intervenes to protect financial stability, then the problem becomes public.”

In addition, the institution warns that if cryptocurrencies become a widespread means of payment and even unofficially replace domestic currencies, “this could threaten the monetary sovereignty of countries.”

Unctad notes that in developing countries with pent-up demand for reserve currencies, stablecoins carry particular risks.

For some of these reasons, the International Monetary Fund (IMF) has assessed that cryptocurrencies pose risks as an eventual legal tender, recalls the text of the entity.

Unctad further details, in another report, the implications of cryptocurrencies for the stability and security of monetary systems, as well as for financial stability.

In another analysis, she points to the risks of doing “too little and too late” on the cryptocurrency issue.

These assets can facilitate remittances, but also allow tax evasion and the flow of illicit capital, recalls Unctad.

Cryptocurrencies can also reduce the effectiveness of capital controls, “a crucial instrument for developing countries to preserve their political space and macroeconomic stability”.

In this context, Unctad advocates that authorities in developing countries adopt some measures, such as ensuring comprehensive financial regulation of cryptocurrencies; restrict advertisements related to them and other high-risk financial assets; ensure that there is a public payment system that is safe, reliable and that is not expensive for the population; and that these countries agree to implement global tax coordination to address cryptocurrencies, regulation and information sharing on these assets.

Unctad also advocates a review of capital controls, to take into account characteristics of cryptocurrencies, such as the fact that they are decentralized and not limited to borders.

Source: CNN Brasil

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