Can blockchain close critical gaps in development?

As aid budgets shrink and accountability demands rise, traditional systems are struggling to keep pace. But in fragile and underserved contexts, where financial infrastructure often breaks down — or is altogether lacking — blockchain-based tools are showing new opportunities.

That shift was at the heart of a high-level official side event at the Fourth International Conference on Financing for Development, or FfD4, co-hosted by the Stellar Development Foundation, or SDF, and Deutsche Gesellschaft für Internationale Zusammenarbeit, or GIZ.

Blockchain, a decentralized digital ledger that records and verifies transactions across a distributed network, enables funds to move quickly, securely, and with full traceability. Its core attributes — speed, low cost, and transparency — make it particularly well-suited to current humanitarian and development contexts.

“The traditional system wasn’t built for the complexity we’re dealing with today,” said Candace Kelly, SDF’s chief legal officer, in her opening remarks.

Other panelists echoed the need for adaptation in the present development context. “Doing things the way we were doing before is not getting us anywhere,” said Robert Pasicko, co-founder of the United Nations Development Programme Alternative Finance Lab, or AltFinLab, pointing to regression on the Sustainable Development Goals in many countries since the COVID-19 pandemic. “It’s about having a smarter way to do [aid].”

The session explored how blockchain-based solutions are already being used on the ground to expand financial access — and what it will take to embed these tools into systems that are sustainable, scalable, and inclusive.

Current applications of blockchain in development finance

From paying front-line workers in conflict-ridden environments to enabling cross-border transactions, blockchain-based tools are already delivering measurable results, particularly in contexts where traditional banking infrastructure is largely inaccessible.

GIZ, in collaboration with SDF and the Union of Medical Care and Relief Organizations, deployed the Stellar Disbursement Platform, or SDP, a blockchain-based payment system that enabled faster, more transparent disbursements to over 900 health care workers in a conflict-affected region, where workers were often paid late and often saw their salary affected by currency devaluations.

“[The SDP] showed that digital financial infrastructure in such a fragile and difficult environment [...] can uphold the highest standards of compliance, efficiency, and transparency,” said Kristian Lempa, GIZ’s head of division for global policy, governance, and cities. Providing quick and affordable access to salaries also allows health care workers to focus on their essential work and can help foster trust in governments and health systems, Lempa said.

“Since the beginning of last year, we’ve suddenly seen a huge interest from governments [in blockchain],” Pasicko said. “I think the idea of blockchain has moved beyond the Bitcoin bubble — we’re seeing [its relevance] in day-to-day use. Digital payment [solutions] are very much needed immediately.”

Leveraging real financial inclusion

We often talk about inclusion in abstract terms. In access to financial systems, however, exclusion can be easily quantified: As of 2022, 1.4 billion people are still unbanked, and over 2.5 billion people lack internet access.

Built on the Stellar blockchain, the digital wallet Decaf is showing how blockchain can power everyday transactions across both geographic and socioeconomic borders, bringing into the fold populations who have historically been excluded.

“We like to call it ‘global bank on chain,’” said Fernanda Orduña Rangel, Decaf’s co-founder. In countries such as Colombia, she explained, smartphone and internet penetration far outpace access to traditional banking. The system was not built for the people who need help the most because they are not seen as valuable, revenue-generating customers, she said. “These individuals have been left with few options.”

Rangel shared the story of a Colombian couple who, while migrating to the U.S. on foot, had their life savings — packed on their bodies — stolen by a cartel in Mexico. “They were left with no money, no dignity, no security, and no way to know if they’d even eat the next day.” With blockchain-based wallets, she said, that risk is avoidable. Digital funds mean there’s no physical cash to steal, and they can be accessed from anywhere — even if your mobile device is lost or stolen

Beyond improved security, the technology is reaping benefits by expanding economic opportunities. Rangel described a Venezuelan woman who was unable to find work in her country but was not willing to leave in search of employment and a better life. Now, however, she works remotely for a U.S. company, earning wages in USDC, a cryptocurrency stablecoin pegged to the U.S. dollar. The steady value protects against inflation at home, and the Decaf platform allows users to easily “cash out” in local currency or even invest their savings. For many historically excluded from formal financial systems, that stability — and the option to grow their money — offers a new path to long-term security.

A new architecture for development finance

Experts see growing applications for blockchain in development, but stress that ultimately, a fundamental redesign of how financial systems are structured and deployed is what is needed amid strained official development assistance. “Blockchain could be the foundation of a financial architecture that looks a bit different, but that is very trustworthy and transparent,” Lempa said.

While much of the conversation has focused on individual users, the bigger shift is happening upstream, as institutions explore ways to optimize large-scale financial flows, said Tori Samples, director of product at SDF.

At a time in which organizations across the world are facing funding constraints, the efficiency and cost savings that accompany blockchain — removing, in many cases, the need to use intermediaries or pay conversion fees — are a huge draw. Lempa also noted the potential of blockchain to help surface value hidden in the informal economy, which, in some countries, represents up to 90% of economic activity and often goes untaxed: “Blockchain could help bring these transactions into the tax system, contributing to public revenue,” he said.

Lempa also pointed to the ability of blockchain to address entrenched political and economic challenges, as the totally traceable transactions enable transparency — an essential step toward rebuilding trust in democratic institutions. This transparency would also help advance efforts to tackle illicit financial flows. “We’re losing $1.4 trillion annually in illicit flows. Blockchain presents a real opportunity to address that,” Lempa said.

Scaling technology — and evolving systems

While blockchain brings clear technical advantages, its impact depends on integration into systems that support scale over the long term. Successful deployments demonstrate that unlocking the full potential of blockchain will require clear policies, trusted delivery channels, and localized training.  

At the institutional level, we need to be clear on what’s required: consumer protection, market regulation, and the kinds of institutions needed to scale blockchain systemically.

Finally, human capacity remains a critical piece. “Digital literacy and training are essential,” Lempa said. If people are aware of the options and the benefits they offer, “they’ll begin to demand them.”

At the end of the day, impact depends on how the technology is applied. Pasicko urged the need to move beyond one-size-fits-all models and toward locally grounded, co-created solutions. In development, you can take two approaches, he said. You can sell a solution and hope it fits, or you can ask, “What’s the problem, and how can we help solve it?” In the case of blockchain, “it’s about crowdsourcing where digital payments can genuinely make a difference.”