UN trade organization skeptical

In the policy briefs of the United Nations Conference on Trade and Development (UNCTAD), the organization calls for Bitcoin and Co. to be curbed in developing countries. It argues that the disadvantages would outweigh the advantages. The UN organization sees growth of over 2,000 percent in developing countries during the pandemic. The UN cites the ability to transfer money quickly and cheaply on the one hand and protection against inflation on the other as reasons for the rapid growth.

On the negative side, it cites the risks associated with its use: Hack of crypto exchanges and loss of digital assets and high energy demand for crypto mining. Especially in developing countries with poor energy infrastructure, the increased energy consumption poses a risk of blackouts. Alongside this, countries are missing out on important tax revenues due to the anonymous, untraceable transactions. To counter the latter problem, the UN Trade Organization recommends higher taxation of cryptocurrencies compared to other financial assets.

Poverty as a double risk factor

The precarious financial and economic situation not only affects people’s wealth, but also their level of education. Lower education stands in the way of access to lucrative work and prevents prosperity. At the same time, using cryptocurrencies requires some basic technical knowledge. Individuals with little understanding of technology are at greater risk of realizing losses or falling prey to scammers. It’s a vicious cycle of poverty that has existed for decades, and cryptocurrencies add a new aspect to it.

Dr. Penelope Hawkins, senior economic affairs officer in Debt and Development Finance, Globalization and Development Strategies at UNCTAD, also sees a responsibility on the state to provide better and secure payment systems for marginalized people in this context.

Don’t marginalize cryptocurrencies

Despite all the criticism, however, the UN maintains a pragmatic approach to the issue: last year in June, the UN Environment Programme issued an article on cryptocurrencies that recommends further experimentation in the area of blockchain to learn more about the technology. This attitude is reasonable and coincides with a new analysis by blockchain researchers at Chainalysis, which sees mostly low- and middle-income countries at the forefront of crypto adoption: The Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal or Indonesia.

Unchallenged in first place is Vietnam, where crypto gaming, including play-to-earn (P2E) and move-to-earn (M2E) concepts are particularly popular. The study comes to the encouraging conclusion that investors retain their optimistic attitude towards cryptocurrencies – despite falling prices. Thus, neither bear markets nor crypto winters manage to slow down global crypto adoption. As mentioned at the beginning, real economic conditions in developing and emerging markets are so critical that cryptocurrencies present themselves as an alternative and way out for people.

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