The U.N. is sending Ukrainians aid in crypto. Should it?
- Oops!Something went wrong.Please try again later.
The United Nations said Thursday it will start aiding people displaced by Russia's war in Ukraine with cryptocurrency.
The organization's refugee agency, the Office of the U.N. High Commissioner for Refugees (UNHCR), which often sends funds to those displaced from their homes for things like rent, food and heat, will transfer USD Coin (USDC) - a cryptocurrency pegged to the U.S. dollar and considered a stable coin - to uprooted Ukrainians who can ultimately exchange it for cash at MoneyGram locations worldwide.
Proponents said it will help displaced people get money quicker and limit loss or theft in transit - but some skeptics say that adding another layer to getting aid at a time when the cryptocurrency market is in upheaval could be problematic and risky.
"They are basically telling people to get into crypto," said Molly White, a crypto critic who writes the blog Web3 Is Going Just Great. But there are "parts of the crypto industry that involve enormous risks."
On Friday, UNHCR treasurer Carmen Hett said this program will not expose displaced people to unsavory parts of the crypto world and has little to do with broader market turmoils.
"We are not here providing a training to anyone on gambling, or enticement to that effect," she said.
Other officials note it plugs a crucial need for displaced Ukrainians.
"Speed is of the essence in humanitarian action," Karolina Lindholm Billing, the UNHCR representative to Ukraine, said in a statement announcing the move. "It's also essential to provide people with a range of options for receiving aid, as one size does not fit all."
In recent months, the cryptocurrency world has been in turmoil. A leading exchange, FTX, has filed for bankruptcy. Its former CEO, Sam Bankman-Fried, is detained in the Bahamas on a litany of fraud charges. Bitcoin, a popular cryptocurrency, has lost significant value.
Other cryptocurrencies considered stable, such as TerraUSD, have collapsed in recent months.
Still, cryptocurrency has already played an important role in the war. The government raised close to $100 million in crypto donations in the early days of the war to fund operations, government officials said in March.
Now, the United Nations will pilot its crypto aid program in the Ukrainian cities of Kyiv, Lviv and Vinnytsia. It has been tested for six months and will expand to more "war-affected" people inside the country and Ukrainian refugees in 2023, officials said. It is unclear how successful the tests have been.
To receive funds, uprooted people will have to download a virtual wallet app, called Vibrant, on a smartphone. Money, in the form of USDC, will be transferred to their account. From there, they can exchange the cryptocurrency into euros, dollars or other local currency at one of roughly 4,500 MoneyGram locations in Ukraine.
The currency is on the Stellar blockchain, a network for crypto money exchange. The program is co-developed with the Stellar Development Foundation, a nonprofit that advocates for use of the Stellar blockchain.
Stellar officials said that in the past humanitarian aid projects have been limited in scope due to geographical constraints, but using cryptocurrency allows it to scale worldwide, bringing concerns from others.
Oleksandr Bornyakov, Ukraine's deputy minister of digital transformation, said that using cryptocurrency to dole out humanitarian aid is a good use case and will be crucial for the safety of his citizens.
"For fleeing Ukrainians, and primarily for those whose banks are inaccessible, this pilot project . . . will serve as a possible lifeline for survival," he said in a statement.
Still, having people download a cryptocurrency wallet exposes them to a risky world of cryptocurrencies, White, the cryptocurrency critic, added.
"Most crypto wallets are constantly trying to get you to buy more crypto," she added, leading her to worry people might end up dabbling in other cryptocurrency such as bitcoin or "crazy altcoins," which many regard as akin to gambling. Hett said aid recipients will not be able to swap USD Coin for other cryptocurrency, only exchange it for cash.
The real winners in these programs, White said, are cryptocurrency companies who get coverage saying that they've found a powerful reason for cryptocurrency to exist. "It isn't actually helping people," she said, though noting it's still "good when refugees get aid."
She added: "But I think it's maybe a little bit telling that the story here is not 'look at all this money we're sending to Ukrainian refugees,' It's 'look at this stablecoin that we're using."
Lia Nower, the director of Rutgers University's Center for Gambling Studies, said giving cryptocurrency to displaced Ukrainians might not be worrisome in the immediate moments after they've been uprooted. It becomes a bigger risk if the program expands to Ukrainian refugees who settle elsewhere, she said.
"That will be more problematic," Nower added. She noted that refugees are often at a higher risk for gambling addiction, and even if they are given stable coins that can only be exchanged for cash, they could "turn around and . . . use a crypto exchange to buy more crypto with the cash that they got," she said.
"There's all sorts of ways to do things," she added.
Related Content
Rigged: The undoing of America's premier bodybuilding leagues
Five down in Apt. 307: Mass fentanyl deaths test a Colorado prosecutor
A newspaper vanished from the internet. Did someone pay to kill it?
