Last month, UNCTAD, the trade and development arm of the United Nations, published Policy Brief #100, titled Not All That Glitters Is Gold: The High Cost of Unregulated Cryptocurrencies.
UNCTAD is part of the UN and deals with trade, development, finance, technology, entrepreneurship, and sustainable development.
UNCTAD draws attention to the exponential growth in the use of cryptocurrencies around the world since the start of the recent pandemic. At the same time, the greatest distribution falls on developing countries, “where government oversight and control is often less.”
This entails significant risks and costs in terms of the monetary sovereignty of states, political space and macroeconomic stability.
At the same time, UN experts openly write in their report that the document is not technical, but political in nature. And serves the purpose of studying the risks, costs, motives, and analysis of the current regulatory framework in the crypto sector.
In particular, the skepticism on the part of the authors of the report is related to El Salvador, where Bitcoin has become legal tender, but the number of transactions in BTC remains small. At the same time, “bitcoin-backed government bonds have been issued, the volatility of which could lead to the default of the South American state.”
UNCTAD: the purpose of the document
Obviously, the purpose of the document is to provide “policy recommendations that developing countries can [should?] consider and follow these recommendations”.
Among other things, UNCTAD recommends “restrict or prohibit advertising related to cryptocurrencies, including advertising the issuance of central bank digital currencies”.
And this fact suggests that the specialists of the United Nations do not “specially” understand the issue.
Another recommendation concerns identity verification. UN experts believe that “crypto-exchanges operating in developing countries need to request identity verification on a mandatory basis, and in addition, oblige crypto-exchanges to register in special public registries”.
But the regulator once again makes the same mistake – it does not distinguish between custodial and non-custodial wallets.
Non-custodial wallets are technically not subject to KYC or registration obligations
In addition, UNCTAD proposes to increase transaction and trading fees from cryptocurrency exchanges by introducing a new type of tax for them.
UN experts believe that it is necessary to prohibit regulated financial institutions from holding stablecoins and cryptocurrencies or offering related products to customers
In the light of reality and adequate widespread adoption of cryptocurrencies around the world, the recommendations look absurd and in many ways destructive. And besides, the CBDC advertising ban looks like an open attempt to protect the dollar financial system from the digital yuan and, probably, the digital ruble.