The share of the population that owns cryptocurrencies in India is about 7.3%, just below the US where 8.3% of the population owns crypto assets, according to the United Nations Conference on Trade and Development (UNCTAD).
The country where the largest share of the population owns cryptocurrency is war-torn Ukraine (12.7%), followed by the Russian Federation (11.9%), Venezuela (10.3%), Singapore (9.4%) and Kenya (8.5%).
India ranks seventh on the list, followed by South Africa and Nigeria.
The United Kingdom ranks 13th with 5% of its population owning crypto assets, followed by Brazil and Pakistan at 4.9% and 4.1%, respectively.
Global use of cryptocurrencies has increased exponentially during the Covid-19 pandemic, including in developing countries, says the UN trade body. While these private digital currencies have rewarded some, and facilitated remittances, they are an unstable financial asset that can also bring social risks and costs, it adds.
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, says UNCTAD.
"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," it warns.
In developing countries with unmet demand for reserve currencies, stablecoins pose particular risks. "For some of these reasons, the International Monetary Fund has expressed the view that cryptocurrencies pose risks as legal tender," says UNCTAD.
The United Nations' trade body urged authorities to take action to curb the expansion of cryptocurrencies in developing countries. "Ensure comprehensive financial regulation of cryptocurrencies through regulating crypto exchanges, digital wallets and decentralized finance, and banning regulated financial institutions from holding cryptocurrencies (including stablecoins) or offering related products to clients," it says.
It also suggested countries to restrict advertisements related to cryptocurrencies, as for other high-risk financial assets. "Provide a safe, reliable and affordable public payment system adapted to the digital era. Agree and implement global tax coordination regarding cryptocurrency tax treatments, regulation and information sharing. Redesign capital controls to take account of the decentralized, borderless and pseudonymous features of cryptocurrencies," says the global trade organisation.
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. In this way, cryptocurrencies may also curb the effectiveness of capital controls, a key instrument for developing countries to preserve their policy space and macroeconomic stability, warns UNCTAD.