In times of crisis, individuals and organizations need to step up and help those in need. The Russian war in Ukraine has led to a humanitarian emergency and we have seen a new breed of challenges in the humanitarian sector. These are individuals and groups using innovative approaches to provide much-needed aid to those affected by the war, such as the use of so-called stable coins for humanitarian aid. Stable coins are a type of cryptocurrency that is usually pegged to a fiat currency[1]. This stability makes them an attractive option for humanitarian organizations looking to provide aid in conflict zones.
Traditional methods of sending aid, such as wire transfers or physical cash, can be slow, costly, and risky while stable coins can offer a faster and more secure way to transfer funds with no needs for intermediaries. In fact, stable coins offer a swift alternative to conventional payment methods like wire transfers or international bank transfers, eliminating the inconvenience of waiting days or weeks for transactions to finalize. With stable coins, individuals and businesses can swiftly send and receive money within a matter of minutes or even seconds, presenting an optimal solution for those seeking rapid fund transfers. Moreover, blockchain can transfer not only assets like money but also ownership, goods or a contract. What makes blockchain different from other networks is that it doesn’t just copy the value of the asset, but it transfers the asset from one actor to another[2].
Humanitarian disruptors[3], have been quick to recognize the potential of stable coins for aid delivery in Ukraine. For example, the United Nations High Commissioner for Refugees (UNHCR) and the Stellar Development Foundation (SDF), an organization supporting the growth of the Stellar blockchain, announced on December 15th the launch of a “blockchain payment solution for digital cash distribution to internally displaced persons (IDPs) and other war-affected people in Ukraine.”[4] The major advantages of blockchain in the humanitarian area is freedom and dignity that is given to people displaced by war. Currently, in the whole Ukraine there are 4,500 spots where eligible persons can withdraw money at any time, and not be limited by bureaucratic constraints. People displaced by wars very often are in a very difficult financial situation, they are forced to live temporarily in poor conditions, such as in overcrowded asylum centres. Generally, they depend on the goodwill of receiving communities. That is why being able to decide what to buy and where gives refugees a sense of dignity not making them beg for financial support, which is crucial for them in such a difficult situation.
This approach has also several hard benefits. First, as there are no intermediaries involved, blockchain ensures that aid reaches those who need it the most, without the risk of corruption or diversion. Second, it allows for greater transparency and accountability since transactions on the blockchain are immutable and publicly accessible. Third, it enables faster and more efficient aid delivery, as stable coins can be transferred instantly, with no costly and time-consuming manual processes. UN Women, a United Nations organization dedicated to gender equality and women’s empowerment, already used blockchain solutions in a refugee camp in Jordan where women receive a salary on their individual accounts. They can use the funds in the camp supermarket simply by scanning their iris, touchless and without any cash. Participants of this pilot project noted that using blockchain helped them to increase their financial literacy: they learnt how to effectively save money as they buy only daily needs products. Moreover, by scanning the iris, the refugees are sure that only they can access the money, thus it gives them a strong sense of security.
However, there are some challenges that also need to be addressed. One issue is the volatility of some stable coins which could result in aid recipients receiving funds that are worth less than expected. This is especially important in relation to Ukraine, where the local currency has experienced significant fluctuations in recent years. Another challenge is the need for adequate infrastructure and connectivity, in fact to receive stable coins aid recipients must be able to access a mobile device and an internet connection. This can be a barrier for those living in remote or conflict-affected areas where infrastructure is lacking. To address this, some organizations are partnering with local NGOs to distribute aid on the ground. Moreover, as every performed activity within the network is easily identifiable, blockchain solutions are characterized by their transparency. Paradoxically, this strong asset can have negative consequences. NGOs operating in war-zones can be targeted by authoritarian regimes for providing help to those in need. Finally, we cannot forget that blockchain solutions require internet connections and then they consume a huge amount of energy, which can be problematic in war-torn areas with destroyed power plant facilities or in countries where the price of electricity is relatively high.
Despite these challenges, the use of stable coins for humanitarian aid holds great promise. By leveraging the speed and security of stable coins, humanitarian organizations can deliver aid more quickly and efficiently, ultimately helping to save lives and alleviate suffering. Yet, it is important to note that technology alone is not enough to solve the complex challenges that the humanitarian sector faces. The use of stable coins, drones, and other innovations must be coupled with strong partnerships, local knowledge, and a deep understanding of the needs of the communities being served. Humanitarian organizations must continue to engage with local communities and work in partnership with them to deliver aid that is tailored to their specific needs. Finally, we need more research on stable coins to fully understand the technical challenges and limitations. More debate on the ethical aspect of using blockchain solutions is certainly needed. There is also a place for policymakers and international organisations like the European Union to set clear legal frameworks on the use of such solutions, so that it complies with international human rights laws and standards of humanitarian assistance.
In conclusion, the use of stable coins for humanitarian aid represents an exciting development in the humanitarian sector and one that holds great potential for helping those in need. As the world faces an increasing number of humanitarian emergencies, organizations should consider stable coins to help overcome some of the traditional barriers to aid delivery, enabling faster and more efficient responses to crises. Despite some objections raised, there is currently no other solution that provides refugees with assistance with such a level of efficiency.
Authors:
Roberta Finocchiaro is currently undertaking a master’s in European Interdisciplinary Studies at the College of Europe in Natolin, focusing on the EU’s neighbourhood. She holds a double degree in Italian and French law from the Alma Mater Studiorum of Bologna and the University of Paris X Nanterre. Her interests include migration management, refugees and human rights.
Tomasz Meres holds a master’s degree in French language and literature from the Jagiellonian University in Cracow and currently is undertaking a Master’s degree in European Interdisciplinary Studies at the College of Europe in Natolin. He worked previously in the private sector and his interests include migration issues and climate action.
[1] A Fiat currency is a form of currency that is legal tender but has no fixed or intrinsic value and is not backed by any physical assets.
[2] “Blockchain for humanitarian action and development aid”, Andrej Zwitter, Mathilde Boisse-Despiaux, Journal of International Humanitarian Action, 2018.
[3] Humanitarian disruptor is an agent in the humanitarian field that provides new theories, strategies, or technological advancements that upend and alter the conventional ways of helping those in need. These disruptors work to address persistent problems and inefficiencies to produce better, more efficient, and more long-lasting solutions for humanitarian endeavours.
[4] Terence Zimwara, “UNHCR Launches Blockchain Payment Solution to Support Ukrainians Displaced by War,” December 17, 2022.
