7.3% of Indians Owned Digital Currency in 2021, 7th Highest in the World: UN

Over seven percent of India's population owns digital currency, according to the United Nations, which also said that the use of cryptocurrency rose globally at an unprecedented rate during

the COVID-19 pandemic.

The UN trade and development body, UNCTAD, said that in 2021, developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns

cryptocurrencies.

Ukraine topped the list with 12.7 percent, followed by Russia (11.9 percent), Venezuela (10.3 percent), Singapore (9.4 percent), Kenya (8.5 percent), and the US (8.3 percent).

In India, 7.3 percent of the population owned digital currency in 2021, ranking seventh in the list of top 20 global economies for digital currency ownership as share of population.

“Global use of cryptocurrencies has increased exponentially during the COVID-19 pandemic, including in developing countries,” UNCTAD said.

In three policy briefs published on Wednesday, it said that while these private digital currencies have rewarded some and facilitate remittances, they are an unstable financial asset that

can also bring social risks and costs.

The policy brief titled 'All that glitters is not gold: The high cost of leaving cryptocurrencies unregulated' examines the reasons for the rapid uptake of cryptocurrencies in developing

countries, including facilitation of remittances and as a hedge against currency and inflation risks.

“If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoisation), this could jeopardise the monetary sovereignty

of countries,” it said.

In developing countries with unmet demand for reserve currencies, stablecoins pose particular risks. For some of these reasons, the International Monetary Fund has expressed the view that

cryptocurrencies pose risks as legal tender, it said.

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 on the stability and security of monetary systems as well as their financial stability.

“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 said, adding that depending on national capabilities and needs, monetary authorities could provide a central bank digital currency or more readily, a fast retail

payment system.

Given the risk of accentuating the digital divide in developing countries, UNCTAD urged authorities to maintain the issuance and distribution of cash.

The 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.

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.

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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