UN pilots blockchain and USDC stablecoin for disbursements in Ukraine

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Source: Global Government Fintech

The United Nations (UN) agency that helps refugees is trialling blockchain technology and a well-known so-called ‘stablecoin’ pegged to the US dollar for digital cash distribution to internally displaced persons and other war-affected people in Ukraine.

UNHCR is working with the US-headquartered Stellar Development Foundation on the pilot initiative, which is taking place in capital Kyiv, as well as the cities of Lviv and Vinnytsia. The aim is to expand the trial to further cities and towns in the country, which continues to face wave after wave of Russian missile strikes.

The aid disbursement solution is based on Stellar, an open-source cross-currency transaction system and platform for digital asset issuance, and uses US-headquartered peer-to-peer payments technology company Circle Internet Financial’s USD Coin (USDC) — a stablecoin where one USDC is equal to one US dollar. Prospective recipients need to possess a smart-phone and have downloaded a wallet app called ‘Vibrant’ (developed by a subsidiary of the Stellar Development Foundation) to receive their digital cash.

UNHCR confirms eligibility and distributes the USDC directly and instantly into a recipient’s Vibrant wallet. This provides a ‘secure place to hold and transport funds in USDC, a stable store of value, allowing people to travel within the country or cross borders without the need to carry cash’, according to a UNHCR press release. The initiative ‘ensures the delivery of cash assistance directly into the hands of those being assisted quickly, efficiently and securely with full value transfer traceability and accountability’, the UN states.

When recipients choose to convert their digital money to cash (whether this is dollars, euros or local currency), they can withdraw their funds at any MoneyGram location, including more than 4,500 MoneyGram locations in Ukraine. MoneyGram is a US-headquartered money transfer company.

‘Possible lifeline for survival’

UNHCR, working with its technology solutions provider the UN International Computing Centre (UNICC), are ‘among the first’ organisations to pilot this Stellar-based aid disbursement solution anywhere, the Geneva-headquartered organisation states. It adds that the project’s pilot phase is designed specifically for Ukraine but ‘can be adapted worldwide’.

The solution has been ‘extensively tested’ for the past six months and is expected to be expanded to reach ‘more war-affected people inside Ukraine as well as refugees from Ukraine in early 2023’, UNHCR adds.

The announcement of the initiative comes two years since Ukraine’s government announced a partnership with the Stellar Development Foundation to assist with its digital money strategy and infrastructure. The Ministry of Digital Transformation, which was established in 2019, signed a memorandum of understanding with the non-profit organisation – which exists to support the development and growth of Stellar – to ‘develop virtual assets and to facilitate central bank digital currency (CBDC) infrastructure’.

“Today, we can see how blockchain technology allows us to scale humanitarian efforts in a way that wasn’t possible before,” said Oleksandr (Alex) Bornyakov, deputy minister of digital transformation of Ukraine on IT industry development, in the UN’s press release. “For fleeing Ukrainians, and primarily for those whose banks are inaccessible, this pilot project providing humanitarian assistance using a digital wallet, will serve as a possible lifeline for survival.”

“The project itself is a vivid example of how blockchain has the potential to transform and revolutionise the way humanitarian funds are allocated,” Bornyakov continued. “The use of blockchain technology allows humanitarian organisations such as UNHCR to be more transparent and accountable and ensure that the most vulnerable people will have access to funds provided in their name. In this way, humanitarian efforts around the world will be strengthened in an unprecedented way.”

‘Look forward to expanding beyond the pilot’

“Ukraine is a global lead in the development of technical solutions to increase access to social protection, including assistance for displaced people,” said Karolina Lindholm Billing, who is UNHCR representative to Ukraine.

“Across the world, UNHCR has been collaborating for years with the tech sector, which has played a crucial role in helping us to innovate to deliver assistance faster, as speed is of the essence in humanitarian action. It’s also essential to provide people with a range of options for receiving aid, as one size does not fit all. Programmes need to be designed with the people they are meant to serve at the centre. I am very pleased that UNHCR and the Stellar Development Foundation have chosen Ukraine for this launch, and look forward to expanding it beyond this pilot, so it can benefit many thousands more people in need of assistance as a result of the war,” she added.

“SDF, together with UNHCR, is realising the promise of blockchain and pioneering a new future for the delivery of billions of dollars in aid disbursed annually,” said Stellar Development Foundation’s chief executive and executive director Denelle Dixon. “Using Stellar, we are helping get funds into the hands of those who need them – and doing it quickly, transparently and without the need for bank accounts or credit or debit cards. We are proud to work with UNHCR to deploy blockchain innovations that will play a role in assisting those in crisis.”

Initiatives spearheaded by the Ministry of Digital Transformation have proved – and remain – invaluable as Russia’s attacks continue. For example, progress made prior to Russia’s invasion in digitising welfare payments.

In respect of CBDC, Ukraine central bank published a ‘draft concept’ of an e-hryvnia digital currency’ just a few weeks ago. The National Bank of Ukraine (NBU) is seeking feedback on a possible CBDC design, as well as its overarching CBDC thinking, after launching an in-depth research project to determine the feasibility of ‘large-scale’ issuance of an e-hryvnia in September 2021 – five months before Russian troops started to pour across the country’s border.

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