In Ukraine, Crypto finds a purpose
Crypto has been used to collect donations during humanitarian crises in the past. It has been successful in amassing pots of money, but it can be difficult to actually spend on the ground. In Turkey and Syria, after a massive earthquake in February that killed more than 50,000 people, recipients of crypto donations complained that they could not use the coins or convert them into fiat currency, limiting their usefulness.
“The challenge is that there’s not much anyone can do with crypto once they have it in their possession,” says Alex Holmes, MoneyGram’s CEO. “It’s not so much a method of payment [vendors] accept.”
The UNHCR pilot overcomes this problem by building in a mechanism to convert crypto to cash.
For now, the stablecoin program in Ukraine is being piloted on a microscopic scale, with fewer than 100 participants in the cities of Kiev, Lviv and Vinnytsia. UNHCR is preparing to expand the initiative to up to 5,000 wallets by April, but this will still represent only a fraction of the number of Ukrainians displaced by the war.
Hett declined to disclose how much money has already been distributed through the program — information she describes as “not that important” — but insists the system is ready to scale. “It’s not about how many millions have flowed through,” she claims, “it’s about how many millions will flow through in the future.”
Ukraine could be an ideal testing ground for experimental financial services of this type. Even before the war, the country nurtured plans under President Volodymir Zelensky to become a digital-first economy and build a digital central bank currency – a blockchain-based version of Ukraine’s hryvnia.
“You have a community accustomed to change, with high consumer technology penetration and generations of people spread across the globe,” says Dora Chomiak, board member of the Ukraine-focused nonprofit Razom. “Combine all these things and it makes sense to go beyond formal banking.”
The process of launching the project has been radical in its own way for a humanitarian system known for its often cumbersome bureaucracy.
The project was incubated for 10 months before launching in December, far faster than backers expected, according to Denelle Dixon, executive director of the Stellar Development Foundation. In addition to the usual red tape, the job of convincing stakeholders about the technology was made more difficult by the implosion of crypto exchange FTX in November, which triggered a crisis of confidence in the sector. “But I think most of that is behind us now,” says Dixon.
The goal is not to replace traditional cash-based intervention, say UNHCR and its partners, but to arm humanitarian organizations with alternative rails to deploy aid that support the full range of scenarios refugees may find themselves in. “The real breakthroughs here are more evolutionary than revolutionary, says Disparte. “It’s about expanding the physical banking system beyond its many limitations.”
It’s also important to avoid scenarios where crypto is used for problems that don’t exist, says Dixon. “You never want crypto to be a square peg in a round hole. This is just another option — another tool in the toolbox.”
Regardless of the small scale of the first pilot, the partners in the UNHCR scheme believe that projects like their own, as well as the $78 million in crypto donated to Ukrainian causes since the start of the war, suggest a permanent change in the way humanitarian aid will be distributed .
UNHCR is investigating the potential for the same system to help those displaced by the economic crises in Venezuela and Argentina, says Hett. And Holmes points to potential applications in Turkey and Syria.
“Having portable access to money, wherever it is, gives people the ability to move forward in life,” says Hett. “The question now is, how can we do more of this? Because we know it works.”