UN sends aid to Ukrainians in crypto. Should he?

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The United Nations announced on Thursday that it will begin helping those displaced by Russia’s war in Ukraine with cryptocurrency.

The organization’s refugee agency, the United Nations High Commissioner for Refugees (UNHCR), which often sends funds to people displaced from their homes for things like rent, food and heating, will transfer USD coins (USDC) – a cryptocurrency tied to the US dollar and considered a stablecoin – for uprooted Ukrainians who can eventually exchange it for cash at MoneyGram branches around the world.

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Proponents said it would help displaced people get money faster and limit losses or theft in transit – but some skeptics say adding another layer to getting help at a time when the cryptocurrency market is in turmoil could be problematic and risky.

“They’re basically telling people to get into crypto,” said Molly White, a crypto critic who writes the Web3 Is Going Just Great blog. But there are “parts of the crypto industry that involve huge risk.”

On Friday, UNHCR Treasurer Carmen Hett said the program will not expose displaced people to unsavory parts of the crypto world and has little to do with broader market turmoil.

“We don’t provide anyone here with training on the game, or the incentive to do so,” she said.

Other officials note that this meets a critical need for displaced Ukrainians.

“Speed ​​is essential in humanitarian action,” said Karolina Lindholm Billing, UNHCR’s representative in Ukraine, in a statement announcing the move. “It’s also essential to give people a range of options for receiving help, as one size doesn’t 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 being held in the Bahamas on a litany of fraud charges. Bitcoin, a popular cryptocurrency, has lost significant value.

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Other cryptocurrencies considered stable, such as TerraUSD, have crashed in recent months.

Yet cryptocurrency has already played an important role in the war. The government collected nearly $100 million in crypto donations early in 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 well the tests passed.

To receive funds, uprooted people will need to download a virtual wallet app, called Vibrant, onto a smartphone. The money, in the form of USDC, will be transferred to their account. From there, they can exchange the cryptocurrency for euros, dollars, or another local currency at any of the approximately 4,500 MoneyGram locations in Ukraine.

The currency sits on the Stellar blockchain, a cryptocurrency exchange network. The program is co-developed with the Stellar Development Foundation, a non-profit organization that advocates the use of the Stellar blockchain.

Stellar officials said that in the past humanitarian aid projects had a limited reach due to geographical constraints, but the use of cryptocurrency allows it to expand globally, raising concerns at the others.

Oleksandr Bornyakov, Ukraine’s Deputy Minister of Digital Transformation, said using cryptocurrency to distribute humanitarian aid is a good use case and will be crucial for the security of its citizens.

“For Ukrainians on the run, and mainly for those whose banks are inaccessible, this pilot project…will serve as a possible lifeline for their survival,” he said in a statement.

Yet having people download a cryptocurrency wallet exposes them to a risky world of cryptocurrencies, added White, the cryptocurrency critic.

“Most crypto wallets are constantly trying to get you to buy more crypto,” she added, leading her to worry that people will eventually jump into other cryptocurrencies such as bitcoin. or “crazy altcoins”, which many consider gambling. Hett said aid recipients will not be able to exchange USD coins for other cryptocurrencies, only exchange them for cash.

The real winners of these programs, White said, are the cryptocurrency companies that get some cover by saying they’ve found a powerful reason for cryptocurrency to exist. “It doesn’t really help people,” she said, while noting that it’s always “good when refugees get help.”

She added: “But I think it’s maybe a bit telling that the story here isn’t ‘look at all this money we’re sending to Ukrainian refugees’, it’s ‘look at this stablecoin we’re using’. .

Lia Nower, director of the Center for Gambling Studies at Rutgers University, said giving cryptocurrency to displaced Ukrainians might not be worrisome in the moments after they are uprooted. It becomes a greater risk if the program extends to Ukrainian refugees who settle elsewhere, she said.

“It will be more problematic,” added Nower. She noted that refugees are often at higher risk for gambling addiction, and even if they receive stablecoins that can only be exchanged for cash, they might “turn around and… use a crypto exchange to buy more crypto with the money”. they have,” she said.

“There are all kinds of ways to do things,” she added.

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