Last Updated: 14 July 2022
The United Nations believes crypto has the potential to undermine the monetary sovereignty of developing countries. Therefore, the organisation recommends strict rules to curb its use. In a document titled “All that glitters is not gold,” the UN writes that the disadvantages of crypto outweigh the potential benefits. This applies to both individuals and financial institutions.
Mandatory registration of all crypto-wallets
In the document, the United Nations expresses particular concern about the social risks and costs associated with crypto. Penelope Hawkings, a representative of the United Nations, indicates to Decrypt that this advice applies to all financial products with a high-risk factor.
According to the United Nations, crypto has the potential to undermine the financial stability of developing countries. Furthermore, the organisation sees dangers in the field of criminality, and crypto limits the possibilities for governments to control capital flows. In short, the United Nations advises making the use of crypto less attractive.
This can be done, for example, by imposing additional taxes on transactions and by making the registration of wallets compulsory. According to the United Nations, it would be a good thing to also prohibit financial institutions from holding crypto themselves. And to stop them from offering crypto services to their customers too.
Banning bitcoin advertisements
That is not the end of it for the United Nations. The powerful body is also advising developing countries to ban advertisements for crypto companies, both in public and on social media. According to the United Nations, this is a “necessity in the context of consumer protection in countries where financial literacy is low.” According to analyses, allowing uncontrolled advertising could lead to “significant losses.”
Rohan Grey of the Willamette University College of Law, contributed to the UN opinion as a consultant. According to Grey, the lack of legislation is a major reason for the pain experienced by consumers in some cases. “The ecosystem is not yet mature and mature. Allowing the industry to do their own thing at the moment is akin to bringing a new drug to market that hasn’t been tested on anything yet,” Grey told Decrypt.
Develop your own payment systems
The UN’s final advice to developing countries is to develop their own payment systems. These should then act as a public good, just like the physical infrastructure that governments build. It also advises developing countries to investigate the possibilities of a Central Bank Digital Currency (CBDC).
CBDCs are a digital form of fiat money issued by central banks and governments. A kind of digital counterpart to bitcoin. Whereas digital Central bank money creates a financial system in which governments have ultimate control, bitcoin is practically the opposite. Bitcoin is, after all, a digital currency over which no one and, at the same time, everyone has ultimate control.
Grey sees the advent of digital central bank money. “With a CBDC, you don’t have to worry that the currency will suddenly lose its value, as is the case with stablecoins. One dollar from the government can always be exchanged for one dollar in the government,” says Grey. It is not clear to what extent this contributes to the preservation of purchasing power.