A senior United Nations official has called on the organization to explore the potential role of digital currencies, central bank digital currencies (CBDCs), and stablecoins in advancing human development.
In a blog post published on Monday, Kanni Wignaraja, UN Assistant Secretary-General, highlighted the growing prominence of Bitcoin and Ethereum as alternative investments, noting that their combined market capitalization peaked at $3.9 trillion in December.
Given the vast financial resources tied to digital assets, she proposed examining ways to channel even a fraction of this capital toward critical sectors such as education, healthcare, skill development, and job creation.
A New Approach to Regulation
Wignaraja advocated for a regulatory framework that balances financial stability with human development objectives. She emphasized the need for pilot programs that assess the impact of digital currency utilization in development projects under strict oversight to ensure responsible implementation.
She also pointed to ongoing CBDC trials in various Asian countries, viewing them as a safer alternative to traditional cash. These digital currencies, she argued, could help integrate unbanked populations into formal financial systems, thereby fostering economic inclusion and expanding access to financial services.
Transparency and the Role of Stablecoins
Wignaraja highlighted blockchain technology’s potential to enhance transparency and accountability while minimizing corruption risks. She proposed that the UN Development Programme (UNDP) assist national institutions in establishing risk management and oversight frameworks for CBDC applications.
Additionally, she endorsed incorporating stablecoins into digital identity and payment systems, suggesting that they could serve as secure transaction tools, particularly in underbanked communities. During economic crises or conflicts, she noted, stablecoins could provide financial liquidity and safeguard vulnerable populations from extreme volatility.
Data Collection and Solution Development
To advance these initiatives, Wignaraja called for comprehensive data collection, documentation of best practices, and case studies to determine the safest and most effective use cases for stablecoins. She stressed that these measures are essential for achieving financial resilience, particularly in post-crisis recovery efforts.
While digital currencies present new opportunities, Wignaraja also acknowledged their environmental impact. She highlighted the high energy consumption and electronic waste generated by cryptocurrency mining, with some operations consuming more power than entire countries like Thailand or Vietnam. To mitigate these concerns, she urged the adoption of sustainable mining practices and the development of eco-friendly digital finance technologies to ensure continued financial innovation without exacerbating environmental degradation.
Addressing Market Volatility and Policy Uncertainty
Wignaraja recognized the uncertainty surrounding the use of digital assets in sovereign bonds and debt restructuring. While some nations are exploring cryptocurrencies as a store of value, their extreme price volatility remains a major obstacle to widespread institutional investment.
She stressed the need for comprehensive macroeconomic analysis, robust regulatory frameworks, and strengthened collaboration between governments and private sector stakeholders to explore how digital currencies can support sustainable finance strategies.
Keeping the Dialogue Open
Concluding her remarks, Wignaraja emphasized the importance of maintaining an open dialogue on this evolving issue.
She reaffirmed that organizations like the UN and development partners play a critical role in fostering discussions and formulating strategies that enable financial technology to drive meaningful social impact.
