According to UNCTAD, stablecoins and cryptocurrencies are unstable financial assets that could worsen the situation for emerging economies.
The impact of cryptocurrencies should be kept to a minimum in developing countries, according to the United Nations Conference on Trade and Development (UNCTAD). The organization claims that digital assets are unreliable financial instruments that could further destabilize already fragile economies.
Numerous citizens of emerging nations made the decision to convert their declining fiat currencies into stablecoins during the global financial crisis. However, the UNCTAD cautioned that people should stay away from such tokens because they too carry risks.
According to numerous studies, cryptocurrencies are more common in nations where the local populace faces severe inflation, financial crises, or even armed conflicts. The UNCTAD has stated that war-torn Ukraine had the highest use of digital assets.
Nearly 13% of the locals there have invested some of their cash in cryptocurrencies. Surprisingly, its military foe, Russia, took second place (11.9 percent ).
The organization argued that buying bitcoin or other cryptocurrencies could be a bad idea, particularly for people living in emerging economies. This is a result of the asset class’s infamous volatility.
“If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoization), this could jeopardize the monetary sovereignty of countries,” the UNCTAD said.
It is reasonable to assume that during the past few years, crypto has drawn attention to itself (especially during the bull run in 2021).
Ironically, the UN agency warned investors to steer clear of such alluring but possibly risky assets, asserting that “everything that glitters is not gold.”
Stablecoins, according to the organization, have the same hazards, thus investors should exercise extreme caution while using them.
