India 7th Highest Digital Currency Ownership
Source : Live Mint
GS III : Science and Technology

What is discussed under India 7th Highest Digital Currency Ownership?

1. 3 three policy briefs published  UN body 
2. Curbing the expansion of Cryptocurrency
3. UN trade and development organisation UNCTAD

Why in News ?

According to the UN, over 7% of India’s population owned digital currency in 2021, ranking seventh in the list of top 20 global economies for digital currency ownership as share of population.

Key Facts

• • According to the UN trade and development organisation UNCTAD, in 2021, 15 of the top 20 economies in terms of the percentage of the population that owns cryptocurrencies were developing countries.
  • Ukraine topped the list with 12.7%, followed by Russia with 11.9%, Venezuela with 10.3%, Singapore with 9.4%, Kenya with 8.5%, and the US with 8.3%.
  • UNCTAD stated that while some people have benefited from these private digital currencies and they have made remittances easier, they are an unstable financial asset that also carries social risks and costs.
  • The monetary sovereignty of nations may be at risk if cryptocurrencies take off as a common form of payment and even informally displace national currencies.
  • Global use of cryptocurrencies has increased exponentially during the COVID-19 pandemic, including in developing countries.

3 three policy briefs published  UN body 

1. 1. All that glitters is not gold
      • This mentioned reasons for the rapid uptake of cryptocurrencies in developing countries.
      • Including facilitation of remittances and as a hedge against currency and inflation risks, under the title ‘All that glitters is not gold: The high cost of leaving cryptocurrencies unregulated’.

        

      • Also mentioned the risks of digital currencies stating that recent digital currency shocks in the market suggest that there are private risks to holding crypto, but if the central bank steps in to protect financial stability, then the problem becomes a public one.
      • If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially this could jeopardise the monetary sovereignty of countries.
   2. Public payment systems in the digital era
      • Focuses on the implications of cryptocurrencies for the stability and security of monetary systems, and to financial stability.
      • It Put forward 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.
   3. The cost of doing too little too late
      • 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.

Cryptoization
Global financial stability report from the International Monetary Fund (IMF) subtitled COVID-19, Crypto and Climate : Navigating Challenging Transitions coined a new name Cryptoization to refer the introduction and/or substitution of crypto in emerging markets.

Curbing the expansion of Cryptocurrency

• UNCTAD urged authorities to take actions to curb the expansion of cryptocurrencies in developing countries, including ensuring comprehensive financial regulation of cryptocurrencies through
  1. regulating crypto exchanges
  2. Digital wallets and decentralised finance
  3. Banning regulated financial institutions from holding cryptocurrencies or offering related products to clients.
• 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

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