MARVEL MUN 2020

UNITED NATIONS GENERAL ASSEMBLY- ECONOMIC AND FINANCIAL

COMMITTEE

A BACKGROUND GUIDE

Agenda: Discussing the feasibility of a cashless economy with special emphasis

on the legislation of crypto-currency

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 INDEX

SL. CONTENTS PAGE NO.

NO.
1 Letter from the EB 3

2 UNGA-ECOFIN: An Overview 5

3 Topic History and Overview 6

4 Current Scenario 8

5 Reference Links 11

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 Letter from the Executive Board

Greetings, delegates of the United Nations General Assembly- Economic and

Financial Committee,

It is of great honour for me to serve as the Executive Board of UNGA-ECOFIN at

Marvel MUN 2020. As you are reading this, you might be experiencing a mixture of
both of anxiety and excitement. We understand your nervousness as well as your
enthusiasm. We value your involvement to redefine diplomacy and thus, we have tried
to prepare this guide with utmost sincerity to ensure that you can best represent your
respective portfolios.

Kindly utilise this document as a guide and not as a one-stop solution for all your
research. The guide aims to simply elucidate the agenda in a way that all of you are at
par with your basic understanding of the committee and the agenda. This document
should be an ignition spark for your further research and not be a full stop.

The committee shall follow the UNA USA format of rules. Minor modifications on the
same may be introduced by the Executive Board to encourage debate.

We promise to bring to you a committee filled with laughter as well as serious

deliberations, negotiations and a lot of learning. We look forward to your heated
debates and thoughtful solutions at Marvel MUN UNGA-ECOFIN 2020.

Anticipating a memorable session,

Executive Board of UNGA-ECOFIN

Marvel MUN 2020.

NOTE:
Do note that this guide is merely a background guide which will give an overview of this
agenda. You cannot use this guide as an official document for validation during the
conference. However, you can use this guide as a starting point for further research with

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respect to your country and the agenda. Please note that only news articles, facts and
figures from the following sources shall be accepted as valid proof in our committee:

1. UN official and affiliated reports, journals, newsletters and articles, etc.

2. Reports from reliable press sources such as Reuters and Al Jazeera,
3. Relevant sources of international law,
4. Official government press releases and documents,
5. And all relevant documents that the Executive Board deems to be fit.

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 UNGA Economic and Financial Committee: An Overview

The Economic and Financial Committee (Second Committee) of the United

Nations General Assembly is responsible for dealing with questions about
economics, global finance, and growth and development around the world. It
was created alongside the other major General Assembly bodies of the
United Nations during its founding. The General Assembly is considered a
critical organ of the UN, since it functions as the UN’s legislative body. Within
the purview of the Second Committee are developing solution mechanisms to
persistent economic inequity and dealing with emerging concerns within
global finance. ECOFIN is composed of all 193 member states of the United
Nations and each of them has equal voting power. It can essentially be
described as the UN’s policy making body for economics, global finance and
economic growth. As in other United Nations bodies (aside from the Security
Council), ECOFIN has the capacity to make policies and draft guidelines but
cannot enforce them. Accordingly, cooperation and support is essential in this
committee as well as thoroughly thought out incentive systems for nations to
voluntarily agree to participate in the resolutions produced by this body.

Topic History and Overview

A cashless society describes an economic state whereby financial transactions

are not conducted with money in the form of physical banknotes or coins, but
rather through the transfer of digital information that act in lieu of physical
currency. Debit transactions, credit cards and plastic money are a few popular
forms of cashless legal tenders.

The trend cashless transactions began in the 1990s when electronic banking
became common. By the 2010s, digital payment methods were common in
many countries. The famous cashless modes of transactions include
intermediary transaction sites such as PayPal, Tez ; digital wallet systems such
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as Apple Pay, Venmo; contactless and NFC payments by electronic card
or smartphone; electronic bills and banking. This grew to such popular use that
larger transactions done in hard cash were treated with suspicion due to the
increase in money laundering and financing of terrorism. Additionally, payment
with a large amount of cash has been actively prohibited by some suppliers. By
2016, only about 2% of the value transacted in Sweden was by cash, and only
about 20% of retail transactions were in cash. Fewer than half of bank
branches in the country conducted cash transactions.

The concept of cryptocurrency began as early as the but it was only in 2009
when a pseudonymous developer under the name Satoshi Nakamoto created
“Bitcoin” that it rose to popular use and fame. Other cryptocurrencies soon
followed, notably Namecoin, Litecoin, and Peercoin. At first, the public was
resistant to accepting the idea of an entirely digital currency. Over the past
several years, however, there has been a significant shift toward
cryptocurrencies being perceived as more legitimate. To qualify as a
cryptocurrency, the currency needs to fulfil the following criteria:

1. Cryptocurrencies do not require a central authority,

2. The system keeps an overview of all cryptocurrency units and their
ownership,
3. The system defines the conditions under which new units can
be mined and how ownership is established,
4. Ownership must be established cryptographically (through a unique
coded mathematical sequence),
5. The system allows for transactions among owners, and ownership
must be proven,
6. The system can perform at most one transaction if multiple
transaction requests for the same unit are submitted simultaneously.
In other words, if multiple requests are made for the same digital

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 money, at most one of the requests will be carried out by the system
to avoid double spending.

Yet even with these definitions, clarifications, and requirements, cryptocurrency

largely remains universally non-standardised and undefined. Owing to this,
sceptical outlooks on cryptocurrency are not scarce. The concerns regarding
cryptocurrency began early In 2016, two cryptocurrencies based on Ethereum
(ETH), Krypton and Shift, suffered 51% attacks, i.e. where a majority group
takes over maximum stake-hold in mining. In 2018, Bitcoin Gold (BTG) was
hacked in a similar 51% hashing takeover and the perpetrators stole $18
million worth of BTG. Unfortunately, due to the anonymity and irreversibility of
block-chain transactions, the currency could not be recovered. In 2014, Mt.
Gox, the largest cryptocurrency trading platform in the world, declared
bankruptcy due to losing $437 million of its customers’ Bitcoins. Nearly 7% of
the world’s Bitcoin were lost due to theft in this massive security breach. The
untraceable nature of cryptocurrency makes it a harbour for illegal activity as
well. Hidden sites known as Darknet markets took advantage of this and
began drug trafficking online.

Current Scenario

Though a cashless economy provides the advantages of reduced transaction

costs, safety, speed and easy database formation, the potential of risks cannot
be overlooked.

Over the course of the past several years, cryptocurrencies have continued to
become a widely used and trusted mode of transaction. Today, the total
market value of all cryptocurrencies is approximately $236 billion. Due to its
digital nature, the cryptocurrency market can be far more unpredictable than
the standard stock market.

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Unlike the universal standards in fiat currency, cryptocurrency does not have
any physical equivalent. A unit of any cryptocurrency is a stand in for a
cryptographic process, a lengthy string of code that is unique to the particular
unit. Essentially, a cryptocurrency is a digital asset that can be traded much
like fiat currency but its value or origin is not overseen by any central authority.
The chief difference between digital currency and fiat is that crypto-currencies
are entirely decentralized; there is no authority regulating or guaranteeing the
value of cryptocurrency units.

Since crypto-currencies are not produced by any central authority, the only way
to obtain them and introduce more cryptocurrency units into circulation is to
“mine” for the coin. Mining is a process conducted by large instalments of
supercomputers that carry out extensive cryptographic calculations to produce
unique algorithms for transactions. For example: Bitcoin uses a one-way
cryptographic algorithm under the name of SHA-256. When information is run
through the algorithm, it spits out a unique sequence of letters and numbers
called a “HASH”. Every unique bit of information has its equivalent unique
HASH, no HASH is every the same for two different things. Additionally, it is
impossible to decipher the original bit of information with just the HASH. The
unit of mining measurement is called blocks. A “block” consists of the HASH
code of a bit of information and the mining difficulty. Thus, as the number of
cryptocurrencies claimed increases, its individual mathematical processes are
solved and claimed, increasing the difficulty of the mathematical computation
that needs to occur in order to mine the next crypto-coin.

One can claim ownership of a particular coin by providing rigorous proof-of-

work (complex mathematical computations that identify a particular coin) and
publicly verifying the coin’s existence by adding it to the public ledger. The
ledger makes all transactions public, thus helping to prevent fraud or double
spending. In order to change the ledger, users need to show proof-of-work in

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their transactions. The ledger, unlike government oversight agency in fiat
currencies, is decentralized and self-run.

An interesting feature of this ledger is that it makes all cryptocurrency

transactions irreversible. This is both a protection and a risk. On the one hand,
it prevents “double spending”. On the other, once a transaction is completed,
there is no way to return the money in the event of an error in the amount sent
or the address of the receiver. Because of the sensitivity of these transactions,
the majority of cryptocurrency transactions are done anonymously or
pseudonymously. This way, the real-world identity of each user cannot be
determined.

The anonymous nature of the cryptocurrency market, however, poses its own
challenges. Though it protects individual users, it has far reaching
repercussions on the market. If individuals or a unified group of individuals is

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able to obtain ownership of a significant portion of the cryptocurrency market,
they can destabilize it through a coordinated series of transactions. These
individuals are what are known as “whales” The metaphor of an actual whale
works well in describing the problem: if a larger sized whale or fish enters a
smaller body of water, the water is displaced and it may have lasting impacts
on the smaller fish and the ecosystem. Similarly, when cryptocurrency whales
choose to inject large amounts of their money into the market by either buying
or selling other cryptocurrencies, they “displace” the price of the
cryptocurrency simply due to the size of the transaction.

Another form of market control is what is known as a 51% attack. In a 51%

takeover a group of cryptocurrency miners controls the majority of the
network’s computing power. This means that an organized group of users that
collectively own 51% or more of the network’s total processing power can stall
the processing speeds of everyone else, which can allow them to prevent
certain transactions from going through. In addition to these, cryptocurrency
theft is another fairly common concern.

Cryptocurrencies also provide an easy method of moving large amounts of

money from one account to the other, or even from one country to the other,
entirely undetected. This becomes a global concern when terrorist
organizations are factored in. Cryptocurrency also allows for an easier path to
successful money laundering. Rather than passing a large amount of money
through bank accounts, digital laundering allows for total anonymity and less
work is needed to conceal the origin and location of this money. Fraud
becomes significantly easier and traces of any sort can also be hidden away in
cryptocurrencies without difficulty.

With the prevalence of Darknet markets trading arms, weapons, and cyber-
weapons, the threat posed by terrorist organizations with access to these
market places multiplies without any form of regulation.

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 Reference Links

https://cointelegraph.com/news/south-korean-officials-consider-revision-of-
existing-crypto-regulations

https://coinmarketcap.com/all/views/all/

https://blog.honeyminer.com/timeline-of-51-attacks/

https://digiconomist.net/bitcoin-energy-consumption

https://www.reuters.com/article/us-g20-argentina-bitcoin/g20-leaders-
to-hold-fire-on-cryptocurrencies-amid-discord-sources

www.finder.com/bitcoin-mining

https://www.cnbc.com/2017/11/21/tether-hack-attacker-reportedly-steals-
30-million-of-digital-tokens.html

www.climatetrade.com

https://www.mof.go.jp/english/international_policy/convention/g20/20180722
.htm

www.genesismining.com/how-cryptocurrency-works

https://www.hydrominer.org/hydromining/

http://si-journal.org/index.php/JSI/article/viewFile/335/325

https://www.pwc.com/us/en/industries/financial-
services/fintech/bitcoin-blockchain-cryptocurrency.html

https://howmuch.net/articles/bitcoin-legality-around-the-world

https://www.forbes.com/sites/bernardmarr/2017/12/06/a-short-history-of-
bitcoin-and-crypto-currency-everyone-should-read/

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https://www.loc.gov/law/help/cryptocurrency/world-survey.php

https://www.fatfgafi.org/documents/documents/virtual-currency-
definitions-aml-cft-risk.html

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