India’s crypto market

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.