The United Nations Conference on Trade and Development (UNCTAD) published a political report on cryptocurrencies on Wednesday. It is the third consecutive report that the agency has dedicated to cryptocurrencies, and together they represent a detailed assessment of the risks that cryptocurrencies present to developing economies and the options for resolving those risks.
UNCTAD Policy Brief No. 102, dated July but just released, argues that while cryptocurrencies can facilitate remittances and foster financial inclusion, they can also undermine domestic resource mobilization in developing economies by enabling tax evasion. tax by hiding the ownership of financial flows and directing them abroad. The authors of the report state that “cryptocurrencies share all the characteristics of traditional tax havens: pseudonymous accounts and insufficient fiscal oversight or weak law enforcement.”
Most developing countries do not have tax regulations covering cryptocurrencies, and the lack of a third-party information system makes it easy to hide cryptocurrency holdings, the report notes. Keep going:
“Contrary to the common belief that cryptocurrencies do not have intermediaries, but work through automated protocols, there are countless service providers, such as exchanges, digital wallets and decentralized finance (DeFi) platforms, that allow the use and holding of cryptocurrencies. cryptocurrencies. Once regulated, these service providers could help improve tax returns.”
The report recommends that developing countries define the legal status of cryptocurrencies and establish reporting requirements for crypto asset service providers. Also, recommends the implementation of a “global tax regulation for cryptocurrencies” and an information exchange system on the holding and trading of cryptocurrencies. Higher taxes on cryptocurrencies compared to other assets would discourage their holding and use for transactions, the report notes.
This is the third cryptocurrency-focused brief that UNCTAD has published in recent weeks. His previous policy brief encouraged developing countries to implement a central bank digital currency (CBDC) or rapid payment system to co-opt the payment benefits of cryptocurrencies without the potential to undermine national economic stability and security. .
UNCTAD’s 100th Policy Brief discussed the need for cryptocurrency regulation in developing countries. He noted the general need for regulation of cryptocurrencies in developed countries where service providers are located, but recommended a series of restrictive measures in developing countries to counter “the considerable risks and costs related to national monetary sovereignty, the political space and macroeconomic stability”.
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