Brief 2: Public payment systems in the digital era

The policy brief titled “Public payment systems in the digital era: Responding to the financial stability and security-related risks of cryptocurrencies” focuses on the implications of cryptocurrencies for the stability and security of monetary systems, and to financial stability.

The brief said, “It is argued that a domestic digital payment system that serves as a public good could fulfil at least some of the reasons for crypto use and limit the expansion of cryptocurrencies in developing countries,”

It further stated, depending on national capabilities and needs, monetary authorities could provide a central bank digital currency or, more readily, a fast retail payment system.

UNCTAD urged authorities to maintain the issuance and distribution of cash since there is a risk of accentuating digital divide in developing countries.

Brief 3: The cost of doing too little too late

The third policy brief titled “The cost of doing too little too late: How cryptocurrencies can undermine domestic resource mobilisation in developing countries” discusses how cryptocurrencies have become a new channel undermining domestic resource mobilisation in developing countries.

While 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.

Cryptocurrencies may also curb the effectiveness of capital controls, a key instrument for developing countries to preserve their policy space and macroeconomic stability, it said.

UNCTAD urged authorities to take actions to curb the expansion of cryptocurrencies in developing countries, including ensuring comprehensive financial regulation of cryptocurrencies through regulating crypto exchanges, digital wallets and decentralised finance, and banning regulated financial institutions from holding cryptocurrencies (including stablecoins) or offering related products to clients.

Considering the new challenges digital currencies can pose, it also called for restricting advertisements related to cryptocurrencies, as for other high-risk financial assets; providing a safe, reliable and affordable public payment system adapted to the digital era; implementing global tax coordination regarding cryptocurrency tax treatments, regulation and information sharing and redesigning capital controls to take account of the decentralised, borderless and pseudonymous features of cryptocurrencies.

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Business NewsNewsIndiaIndia 7th highest in digital currency ownership: UN
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First Published:11 Aug 2022, 09:36 AM IST

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