According to the UN trade and development body UNCTAD, over seven per cent of India’s population owns digital currency.
Highlights of the report –
- Developing economies lead in holding the crypto assets — In 2021, developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns cryptocurrencies.
- Global use of cryptocurrencies has increased exponentially during the COVID-19
- Cryptocurrencies and associated threat —
- The report said that while these private digital currencies have rewarded some, they are an unstable financial asset. It can also bring social risks and costs.
- Recent digital currency shocks in the market suggest that there are private risks to holding crypto.
- However, if the central bank steps in to protect financial stability, then the problem becomes a public one.
- If crypto-currencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoisation), this could jeopardise the monetary sovereignty of countries.
- How cryptocurrencies have become a new channel —
- Cryptocurrencies can facilitate remittances.
- They may also enable tax evasion and avoidance through illicit flows, just as if to a tax haven where ownership is not easily identifiable.
- In this way, cryptocurrencies may also curb the effectiveness of capital controls, a key instrument for developing countries to preserve their policy space and macroeconomic stability.
- Suggestions given —
- Ensure comprehensive financial regulation of cryptocurrencies through regulating crypto exchanges, digital wallets and decentralised finance
- Ban regulated financial institutions from holding cryptocurrencies 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;
- Implement global tax coordination regarding cryptocurrency tax treatments, regulation and information sharing;
- Redesign capital controls to take account of the decentralised, borderless and pseudonymous features of cryptocurrencies.
About the ‘United Nations Conference for Trade and Development’ –
- It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
- It deals with trade issues, investments and other matters concerning development.
- Its headquarters are located in Geneva, Switzerland.
- Important reports by UNCTAD — Trade and Development Report; World Investment Report; Technology and Innovation Report; Digital Economy Report.