Lessons on humanitarian transactions through blockchain

Disruption. Future. Risk. Promise. These are just some of the words that came to participants’ minds when global development professionals were asked about the term “cryptocurrency” at a United Nations General Assembly side event hosted by Devex and Circle — a global financial technology company helping money move at internet speed and the issuer of USD Coin, or USDC.

During the New York event, tagged: Faster, safer, cheaper: Improving humanitarian transactions through blockchain, attendees were asked to brainstorm the various ways in which cryptocurrency could support humanitarian responses in different settings.

Blockchain technology and cryptocurrencies, such as stablecoins, are increasingly being floated as tools to deliver humanitarian aid quicker and cheaper, whether in the aftermath of a natural disaster, during an ongoing conflict, or in response to economic turmoil. COVID-19 saw a rise in the number of cash transfers as a form of social protection, indicating that there could be an appetite for more innovative ways of providing assistance.

The World Food Programme, International Federation of Red Cross and Red Crescent Societies, and Oxfam are some of the big actors already exploring how to best use crypto and blockchain. But, in the humanitarian sphere, the idea is still often met with trepidation or skepticism, explained Dante Disparte, Circle’s chief strategy officer and head of global policy. Still, such technology has the power to remove some of what he calls “frictions” in the delivery of aid.

“When we need disaster relief most, friction gets in the way,” Disparte said. For example, the absence of paperwork destroyed in a hurricane may hold up relief payments. Disrupted banking systems can interfere with people accessing their savings. But cryptocurrency could help in reaching those who need support directly, without the presence of third parties such as banks or financial services companies, Disparte explained.

To take this technology to scale, stablecoin — a form of cryptocurrency with a set value that aligns with the price of another asset — needs to be destigmatized, he added. Circle’s stablecoin, USDC — launched in 2018, is tied to the U.S. dollar, and lives natively on the internet.

“This is a technology that’s here to stay. It’s foundational, second perhaps only to the internet in its opportunity,” Disparte said. “Shame on us, if we don’t participate to create a first mover advantage for the very agencies that are at the cutting edge of global impact and social impact.”

Asked how cryptocurrency might be best utilized in the humanitarian sector, attendees shared their ideas. Here are the takeaways from those conversations.

1. Cryptocurrency has the potential to solve a multitude of challenges.

Event attendees were in agreement that implementing a crypto-based response to a crisis has the potential to solve many challenges NGOs and aid agencies often come up against when responding to a crisis.

“The reality is that many players in development and humanitarian assistance know very little about cryptocurrency, which seems to offer relevant elements to the sector, such as efficiency, timeliness, stability, open source, and transparency,” said Yuko Okamura, deputy global lead for safety nets and a senior economist for social protection and jobs global practice at the World Bank.

If done right, it could, for example, be a form of finance people have access to even when a typhoon has wiped out internet service. It could allow those fleeing a crisis, such as the current war in Ukraine, to retain access to their savings despite crossing a border. And it could eliminate the days, and sometimes weeks, it takes for NGOs to reach communities with cash grants and checks, attendees pointed out.

As an example, in Venezuela, Circle’s USDC was able to reach front-line medical workers amid the COVID-19 pandemic, bypassing the controls imposed by the disputed president, Nicolás Maduro, on the country’s financial system. They were able to buy vital medical supplies they needed at a time when funds were extremely difficult to access.

2. It should be implemented as a complementary system.

Stablecoins, such as USDC, ought to be an instrument to augment the speed at which aid is delivered rather than being viewed as a substitute, Disparte said.

This was echoed by participants who highlighted that people need more than one service from one service provider. That means that rather than viewing the adoption of cryptocurrency into the humanitarian space as something to replace the way in which organizations currently operate, it should be viewed as a complementary system to be used in certain settings and circumstances.

At the same time, attendees suggested cryptocurrency should be part of a bigger digital aid system. What begins as a digital wallet for accessing a form of stablecoin could be expanded upon to include storage of digital ID and education certificates; documents that could be lost or destroyed in a time of crisis, limiting access to a livelihood and benefits elsewhere, said Gayan Peiris, head of data and technology at the United Nations Development Programme.

3. Implementation would need to happen regionally.

There is no use rolling out a cryptocurrency only available in one country, attendees said. That’s especially relevant should displacement be driving people to cross borders. The common unit of exchange must be recognized across multiple countries at the same time and will need regional legal frameworks to underpin it and ensure legitimacy, several attendees said.

USDC runs on many of the world’s blockchains, transcends borders, and has almost $50 billion currently in circulation across over 190 countries.

There will need to be a building of a network of partners who can plug into the system across regions, said Sandra Uwantege Hart, an advisor on blockchain and Web3 innovations in humanitarian action. “Introducing new technology in an equitable way requires advanced planning, people, skills, community consultation and engagement, contextual analysis, systems integration.”

“In order to institutionalize the use of these tools, humanitarian agencies will need to look at how to upskill, build technical capacity, and systematize the use of these applications across the program spectrum from preparedness to response to resilient development,” she added.

4. More extensive communication and education is needed.

While cryptocurrency as a whole needs to be destigmatized within the aid sector itself, that same work will need to be done among the communities that agencies intend to serve, as well as with the local vendor networks. That, attendees said, needs to happen prior to a crisis so that when a crisis hits, individuals already know how to use and engage with an application or wallet using cryptocurrency.

As it stands, many people believe having hard cash is better than any other form of money, said one attendee, but it can lose its value. And it is not traceable. This is why an education and incentivizing component would be key to crypto’s uptake among beneficiaries.

Any communications efforts should be easy to understand, supplemented with visual aids, and come in multiple languages, attendees said.

5. Not another copy and paste solution.

While there may be a tendency in the development and aid sector to simply take a solution that has worked in one context and apply it to another, cryptocurrency is an opportunity to deviate from that model and tailor solutions to each specific context, attendees said.

The best thing to do would be to offer communities the service and let them take it from there. “People don’t need us to intermediate,” one attendee said. “They just need access to the resources. They can then figure out how cryptocurrency might fit into their networks.”

Uwantege Hart stressed the need for an inclusive approach to the way the technology is being built. “How do we make sure that this technology doesn't just serve the institutions creating and using it, but that it genuinely serves and supports the communities that humanitarian agencies work with, and who have been historically excluded from tech innovation in general?” she asked.