Proponents said it would help displaced people get money faster and limit losses or theft in transit, but some skeptics said adding another layer of aid to the cryptocurrency market during unrest could be problematic and risky.
“They’re basically telling people to get into crypto,” said Molly White, a cryptographer who writes the Web3 Is Going Just Great blog. But there are “parts of the crypto industry that carry huge risks.”
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UNHCR was not immediately available for an interview.
“Speed is of the essence in humanitarian operations,” said Carolina Lindholm Billing, UNHCR’s representative in Ukraine, in a statement about the move. “It’s also important to give people a range of options for getting help because 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, was arrested in the Bahamas on fraud charges. Bitcoin, the popular cryptocurrency, has lost significant value.
Other cryptocurrencies that are considered stable, such as TerraUSD, have collapsed in recent months.
However, cryptocurrency has already played an important role in the war. The government raised about $100 million in crypto donations in the early days of the war to fund operations, government officials said in March.
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The UN will now pilot its crypto aid program in Kyiv, Lviv and Vinnytsia, Ukraine. It was tested for six months and will be expanded to include more “war-affected” people inside the country and Ukrainian refugees in 2023, officials said. It is unclear how successful the tests were.
To get coins, rooted people need to download the Vibrant app called Vibrant on their 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 other local currency at one of the nearly 4,500 MoneyGram locations in Ukraine.
The currency resides on the Stellar blockchain, a cryptocurrency exchange network. The project was developed in partnership with the Stellar Development Foundation, a non-profit organization that advocates for the use of the Stellar blockchain.
Stellar officials said humanitarian aid projects have been limited in the past due to geographic restrictions, but the use of cryptocurrency allows it to scale globally, raising concerns among others.
Ukrainian Deputy Minister of Digital Transformation Oleksandr Bornyakov said that using cryptocurrency to provide humanitarian aid is a good use case and will be crucial for the security of its citizens.
“For fleeing Ukrainians, and above all for those whose banks are inaccessible, this pilot project … will serve as a possible lifeline,” he said in a statement.
However, downloading a cryptocurrency wallet exposes people to the risky world of cryptocurrencies, added White, a cryptocurrency critic.
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“Most crypto wallets are constantly trying to get you to buy more crypto,” he added, which worries him that people might end up with other cryptocurrencies like bitcoin or “crazy altcoins” that many see as gambling.
The real winners of these programs, he said, are the cryptocurrency companies that get cover by saying they’ve found a powerful reason for cryptocurrency to exist.
“It doesn’t really help people,” he said, though he noted that it’s still “good when refugees get help.”
“But I think it’s maybe a little telling that the story here is not ‘look at this money we’re sending to Ukrainian refugees,’ but ‘look at this stable coin we’re using.’