You might not understand what the fuss about cryptocurrencies is all about. Or maybe you understand but find it all rather ridiculous. Either way, you have to concede they are not going anywhere any time soon. You might have to dip your toes into those waters at some point.
Not if the United Nations has its way though. The United Nations Conference on Trade and Development is calling for action to stop the rise of cryptocurrencies in developing countries.
Why are they doing this? Aren’t cryptocurrencies supposed to be the financial liberation tool those in poorly managed and repressive countries need? I thought the UN was all about helping said people find a way out of the mess not of their own making.
I don’t think you need a PhD to figure out why cryptos are popular in developing countries. If we had functioning economies, fully connected to the rest of the globe, we would have a passing interest in crypto too.
The UN acknowledges that we are looking for facilitation of remittances and a hedge against currency and inflation risks.
Hence why 15 of the top 20 countries on share of the population that owns crypto are developing countries according to the UN itself. It is this stat that has jolted the overlords at the UN to call for action.
The UN cites its reasons for calling for curbing cryptos. Full disclosure, I’m not a UN fan. Reading through their reasons I find myself hoping none of their recommendations are adopted anywhere in the world.
Crypto instability
We know this one and there really is no disputing it. ‘Crypto’ and ‘Unstable’ are synonyms.
Chart showing the price history chart of the most popular crypto, Bitcoin, over the last year. In the last 12 months, Bitcoin has reached a high of close to US$68,000 and a low of just under $19,000. That is quite the swing.
Swings can be good, depending on the trades you make. As a result, some made killings when Bitcoin made its historic rise to $68,000 during the pandemic. Unfortunately, when one wins, another usually loses. That’s the game isn’t it?
Personally I’m okay with that if all the parties know that that’s how the game goes. I hate the crypto evangelists that promise/guarantee certain returns for those who invest in crypto. That’s misleading people, these markets cannot be tamed and losses are just as likely to be incurred as profits.
So, if the UN is calling for sanity here, then I begrudgingly have to agree that we need to protect our people. Here in Zimbabwe many people sold their houses to invest in crypto and lost everything. That’s terrible.
The solution for me though is not to curb the rise of crypto but to ensure there is proper education on what cryptos are and what the reality is if one were to invest in them. I’m not even comfortable saying ‘invest’ when it comes to crypto but you get the point.
Threat to governments’ monetary sovereignty
I’m not an anarchist but chips on the table, I am not against diminishing governments’ monetary stability. I’m Zimbabwean, so you have to forgive me if I don’t have any faith in government led systems.
The UN fears that if govts step in to protect financial stability that could make the problem of crypto instability a public one. I agree. Let the wild west be the wild west. Govts should not try to protect gamblers. Their role should end at educating people on how stupid investing in memecoins is.
The UN also fears that if citizens unofficially replace local currencies with crypto as a means of payment that would jeopardise govts’ monetary sovereignty.
Okay, is the UN trying to make Zimbabweans adopt cryptocurrencies? Cause that’s how you get people to support crypto. You tell them this would reduce our exposure to the govt’s monetary policies. Where do we sign up?
The UN goes on inadvertently making the case for why we should adopt crypto. They say stablecoins pose a significant threat to govts especially when they have unmet demand for foreign reserves.
That’s Zimbabwe right there. Our central bank is always strapped for foreign currency assets and so is susceptible to a crypto takeover.
The UN says these cryptos present a risk as legal tender though. I cannot argue with that. We recently discussed the crash of a popular stablecoin that wiped US$40 billion in value. You can only imagine where Zimbabwe would be if we had officially adopted that stablecoin as our legal tender.
Instead of waiting and fending off crypto, the UN advises govts to adopt central bank digital currencies. We have discussed those and our RBZ is well into the research process and looks to introduce them some time not too far away.
Taxation
The UN warns that cryptos can be used to evade and avoid taxes. A terrible thing for govts like Zimbabwe’s that need every single dollar they can get. Imagine how Mthuli would be mad if we got around paying his 4% IMTT by simply switching to crypto.
This is a real problem. We can complain about the govt’s inefficiencies and rampant corruption and say that’s why we don’t want to pay taxes. The fact remains though that an underfunded govt is a problem.
If we are in a tight spot right now, it would be much worse if the govt’s revenue was significantly cut.
How should govts slow the rise of crypto?
The UN has lots of ideas on how govts can achieve this and the first is regulation, regulation, regulation. Everything from crypto exchanges, digital wallets and even decentralised finance should be regulated.
Regulation is always welcome but my resistance against it resurfaces when I note that the UN is suggesting using regulation to curb crypto. They are not advocating for the regularisation of crypto but rather the use of regulations to stifle crypto currencies. I can’t stand behind that.
The UN is also calling for regulated financial institutions to be barred from offering crypto products to their clients. Not only that, they are not to be allowed to even hold crypto themselves. I think Zimbabwe is already there.
In other words, the formal financial sector cannot be allowed to lend any legitimacy to the crypto world.
The suggestion I love is that advertising related to crypto should be regulated. Unfortunately, the formal world has shunned the crypto world for so long that the crypto advertising that happens on social media cannot be regulated.
The best that govts, especially the Zim one, can do at this moment is to actually run its own educational campaigns. Try to balance out the crazy, ludicrous crypto campaigns currently circulating in encrypted inboxes.
With all that done, the UN then reiterates that govts should look at CBDCs. This is a digital world after all and govts have to have their own digital solutions. At the very least they should adapt their current payment systems to the digital era.
What do you think about all this?
I have to say I don’t like how the UN is coaching govts on how to curb cryptocurrencies. Their main fear is that cryptos can render these govts powerless. Who is to say that’s not what we need?
Why does the UN acknowledge that we are looking to hedge against currency and inflation risks and to allow for easy remittances and then go ahead and coach govts on how to block that for us? I don’t get it. It is as if the UN caters for govts and not for their subjects. Curious.
I am not a crypto evangelist but I don’t appreciate what the UN is doing here. But that’s me. Let us know what you think in the comments below. Should govts be trying to stifle cryptocurrencies?-techzim