UN asks developing countries to ban Bitcoin ads, regulate crypto wallets

• According to the UN, crypto is a threat to financial stability, preventing authorities from limiting the flow of capital, enabling illicit transactions or activities, and unofficially replacing domestic currencies.

• Regardless of its position on digital assets, the United Nations have backed several initiatives that use such assets.

Cryptos are said to be the safest bet for developing countries with the likes of the Central African Republic making Bitcoin a legal tender. However, the United Nations (UN) has in a recent report cautioned third-world countries on the risk associated with the asset-class.

In a report titled “All that glitters is not gold”, the United Nations Conference on Trade and Development (UNCTAD) admitted that cryptos have some advantages, however, their disadvantages far outweigh the benefits individuals and financial institutions can derive from them. According to the document, developing countries should ban Bitcoin advertisements and subject all related wallets and exchanges to mandatory registration. The idea is to make cryptos less attractive. Other recommendations by the UN include imposing taxes on crypto transactions, banning financial institutions from holding digital assets, and directing them not to offer any crypto-related service to clients.

The UN backs digital asset initiatives

Penelope Hawkins, an economist and senior economic affairs officer at UNCTAD explains that their advice has nothing to do with approving or disapproving cryptos.

This is not about approving or disapproving [of crypto]but pointing out that there are social risks and costs associated with cryptocurrency. This is a recommendation that applies to any speculative or high-risk financial products where returns are uncertain.

The United Nations believes that some of the concerns raised by critics regarding the use of cryptos are genuine. According to them, crypto is a threat to financial stability, preventing authorities from limiting the flow of capital, enabling illicit transactions or activities, and unofficially replacing domestic currencies which in the long run jeopardizes the monetary sovereignty of the nation.

Rohan Grey, a law professor at the Willamette University College of Law, who has been a consultant for the United Nations on digital currencies has also admitted that lack of regulation opens the way for fraud and scams putting consumers at risk.

The ecosystem is not fully ripe and mature. Allowing [the industry]to aggressively market itself would be like having a new kind of drug that hasn’t even gone through the FDA process trumpeting itself as solving cancer.

As part of the advice, developing countries were urged to create their payment system and explore the possibility of coming up with a Central Bank Digital Currency (CBDC). 

This document was motivated by the increasing use of digital currencies which skyrocketed during and after the pandemic. According to the UN, people primarily have an interest in digital assets due to their ability to protect savings from depreciation and rising inflation. 

Regardless of its position on digital assets, the UN has backed several initiatives that use such assets. Early this year, they displayed an NFT art collection called Boss Beauty Role Models during National Women’s Day.