UNCTAD warns developing nations against increasing adoption of cryptocurrencies

The impact of cryptocurrencies should be kept to a minimum in developing countries, according to the UNCTAD.
The impact of cryptocurrencies should be kept to a minimum in developing countries, according to the UNCTAD.

The impact of cryptocurrencies should be kept to a minimum in developing countries, according to the United Nations Conference on Trade and Development (UNCTAD). The organization claims that digital assets are unreliable financial products that could further destabilize already fragile economies.

Warning against cryptocurrencies 

According to various studies, cryptocurrencies are more common in nations where the local populace faces severe inflation, financial crises, or even military conflicts. 

The UNCTAD has stated that war-torn Ukraine had the highest use of digital assets. Numerous citizens of emerging nations made the decision to convert their declining fiat currencies into stablecoins during the global financial crisis. Nearly 13% of the locals there have invested some of their cash in cryptocurrencies. Even Alex Bornyakov, the deputy minister of digital transformation for Ukraine, said that crypto is “essential” to the nation’s fight against Russia, as TheCoinRise reported.

However, UNCTAD warned that people should stay away from such tokens because they too carry risks. Surprisingly, Russia, its military competitor, took second place (11.9%).

The organization argued that buying bitcoin or other cryptocurrencies could be a bad idea, particularly for people living in emerging economies. This is a result of the asset class’ infamous volatility. It stated:

“If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoization), this could jeopardize the monetary sovereignty of countries.”

It is reasonable to say that during the past few years, cryptocurrency has drawn attention to itself. Ironically, the UN agency warned investors to steer clear of such attractive but possibly risky assets, asserting that “all that glitters is not gold.”

Stablecoins, according to the organization, have the same risks; thus, investors should exercise extreme caution while using them.