As the world deals with a suite of economic hardships, people are turning to digital currencies bear the brunt

Major events are trickling down and having vast effects on global economies.

These events—like the supply chain crunch, conflict in Ukraine, and the ongoing pandemic—have forced entire economies, businesses and populations to rethink their economic strategy.

In some instances, vulnerable societies have rapidly turned to cryptocurrencies in a desperate bid to get rich quick.

The use of cryptocurrencies increased exponentially during the Covid-19 pandemic, including in many developing countries.

But recent analysis from the United Nations Conference on Trade and Development (UNCTAD) has found if cryptocurrencies become widely used, they could jeopardise the monetary sovereignty of some countries.

Ukraine tops the list for the greatest share of the population who owns cryptocurrency. Russia and Venezuela come in second and third spot respectively.

In most cases, people own these digital coins as a speculative asset. This means users are banking on their investments becoming more valuable in the future.

But this is raising concerns among researchers, like Dr Peter Howson (Northumbria University), and digiconomist Alex de Vries.

In a recent paper, published in Energy Research & Social Science, the pair found “the unsustainable trajectory of some cryptocurrencies disproportionately impacts poor and vulnerable communities.”

For example, the world’s most popular cryptocurrency Bitcoin, requires the same amount of energy as Thailand.

While this thinking tends to refer to the environmental footprint of cryptocurrencies, the researchers also found “cryptocurrency producers and other actors take advantage of economic instabilities, weak regulations, and access to cheap energy and other resources.”

In some cases, government officials have taken the plunge and entered into the cryptoverse. On the second day of the war in Ukraine, the country’s Digital Transformation Minister reportedly asked his team to arrange government wallets for cryptocurrency payments.

Likewise, Afghanistan also turned to cryptocurrencies when the Taliban seized control in August 2021.

“The central bank gave us an order to stop all money changers, individuals, and businesspeople from trading fraudulent digital currencies like what is commonly referred to as Bitcoin.”

Sayed Shah Saadaat, the police headquarters

However, the Taliban has enforced a nationwide ban on these coins, with some Afghans getting arrested for defying the ruling.

Preying on the poor

The United Nations is pushing for the regulation of cryptocurrencies, restrictions on advertising, and a safe, reliable and affordable public payment system to suit the digital era.

It makes sense because some of the world’s poorest and most vulnerable people are likely to be those disproportionately impacted by proof-of-work cryptocurrency mining.

“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.”

United Nations Conference on Trade and Development

Unlike fiat currencies—like the dollar, pound, or euro—cryptocurrencies are not issued by national governments.

They also eliminate banks and put power in the hands of entire populations.

In El Salvador and the Central African Republic, the national governments have adopted Bitcoin as legal tender.

Other countries, like Nigeria are looking at the representation of digital currencies in the form of a central bank.

Despite concerns about the mismanagement of these digital assets, they appear like they’re here to stay.