Developing countries may have less room to manoeuvre, yet the regulation of cryptocurrencies is possible. The following policies, among others, have the potential to curb the further spread of the risks of cryptocurrencies and stablecoins:
(a) Ensuring comprehensive financial regulation, through the following actions:
Require the mandatory registration of crypto-exchanges and digital wallets and make the use of cryptocurrencies less attractive, for example by charging entry fees for crypto-exchanges and digital wallets and/or imposing financial transaction taxes on cryptocurrency trading;
Ban regulated financial institutions from holding stablecoins and cryptocurrencies or offering related products to clients;
Regulate decentralized finance (such finance may, in fact, not be fully decentralized, given its central management and ownership, which form an entry point for regulation18);
(b) Restricting or prohibiting the advertisement of crypto-exchanges and digital wallets in public spaces and on social media. This new type of virtual, and often disguised, advertisement requires policymakers to expand the scope of regulation beyond traditional media. This is an urgent need in terms of consumer protection in countries with low levels of financial literacy, as even limited exposure to cryptocurrencies may lead to significant losses;
(c) Creating a public payment system to serve as a public good, such as a central bank digital currency. In the light of the regulatory and technological complexity of central bank digital currencies and the urgent need to provide safe, reliable and affordable payment systems, authorities could also examine other possibilities, including fast retail payment systems.
UN “Policy Recommendations”
Developing countries may have less room to manoeuvre, yet the regulation of cryptocurrencies is possible. The following policies, among others, have the potential to curb the further spread of the risks of cryptocurrencies and stablecoins:
(a) Ensuring comprehensive financial regulation, through the following actions:
(b) Restricting or prohibiting the advertisement of crypto-exchanges and digital wallets in public spaces and on social media. This new type of virtual, and often disguised, advertisement requires policymakers to expand the scope of regulation beyond traditional media. This is an urgent need in terms of consumer protection in countries with low levels of financial literacy, as even limited exposure to cryptocurrencies may lead to significant losses;
(c) Creating a public payment system to serve as a public good, such as a central bank digital currency. In the light of the regulatory and technological complexity of central bank digital currencies and the urgent need to provide safe, reliable and affordable payment systems, authorities could also examine other possibilities, including fast retail payment systems.