The United Nations Refugee Agency (UNHCR) recently won the Best Impact Project Award at Paris Blockchain Week for its pilot project based on blockchain technology, which aims to provide cash to people displaced or affected by war in Ukraine. The award is given to projects that use blockchain technology and have a significant social impact. In an exclusive interview for Decripto.org Carmen Hett, UNHCR treasurer, described its features.
Dr. Hett, how did the idea for the project come about?
UNHCR initiated this project as it was exploring using new technology applications such as blockchain for payments with opportunities to scale up and strengthen the provision of cash as a key modality of assistance.
Since 2016, UNHCR has delivered almost USD 5 billion in cash assistance to some 35 million people in 100 countries. Based on our experience in cash-based interventions, we know, from refugees and others that we serve, that cash assistance is their preferred form of assistance.
With millions of Ukrainians displaced due to the war, many of them unable to access their banks, and with Ukraine being relatively advanced in the development of technical solutions to improve access to social protection, UNHCR decided to run this pilot which was fully integrated, and tested in implementation of all scenarios throughout systems, and associated processes in the country to complement the ongoing cash delivery programmes.
What were its characterizing technical elements?
In December 2022, UNHCR, with United Nations International Computing Centre (UNICC) and the Stellar Development Foundation (SDF), and with pro bono legal advice from Linklaters, successfully executed a small pilot to distribute cash assistance to a group of people displaced by the war in Ukraine in the form of Circle Internet Financial’s USD Coin (USDC) — a stablecoin where one USDC is equal to US$1 at all times. This money is directly transferred into the recipient’s digital wallet, which can be accessed via a smartphone, and internet access.
This program allows recipients to convert this assistance to cash, withdrawing their funds in dollars, euros, or local currency at any global MoneyGram location, or to transfer the amount to a personal bank account. This support can then be used to cover basic needs like rent, food, medical care and heating during the winter.
UNHCR was also able to build a bridge between digital currency assets and fiat currency through using integrations of on and off ramps to the blockchain operating network, which provide the entry and exit points for traditional currencies and digital assets for encashment options. On-ramps allow UNHCR to convert traditional currencies into digital assets that can be transferred on the blockchain network and monetary value made available in digital format onto the selected digital wallets for recipients of aid assistance. While off-ramps allow recipients to convert digital assets back into traditional currencies engaged through the embedded encashment design options and processes.
These on and off ramps are important because they allow UNHCR and recipients of humanitarian aid to access the appropriate payment rails, making the blockchain payment solution more accessible to a wider range of recipients in different humanitarian and emergency settings bridging digital monetary value with fiat encashment values.
Moreover, blockchain technology for payments with integrated design options can be made accessible to anyone with an internet connection, and currently on the smart phone, which makes it possible to disburse aid to even the most remote and inaccessible areas. This means that aid can reach those who need it the most, regardless of their location, also the unbanked, allowing for encashment without a bank account.
UNHCR is responsible for program eligibility, beneficiary enrollment and the allocation of assistance to those who need it most, as well as the overall protection of participants, including displaced people and war-affected communities in Ukraine.
How was it received by the recipients? Was it easy to teach them how to use blockchain tools?
This program was designed to be easy to use for recipients, to be extremely simple and self-explanatory. In “three clicks”, recipients can download and receive their money, and it is also designed to enable easy withdrawal. The process is explained fully to all participants.
The pilot was evaluated including via post-delivery monitoring with the beneficiaries and an evaluation of whether the wallet fully met the needs of the Ukrainian context. The review looked at technical, functional, financial, reporting, and compliance aspects.
Beneficiaries were able to activate the digital wallets within minutes and get their cash. Beneficiaries can contact Stellar Network, UNHCR, or MoneyGram with any questions. It was determined that the pilot was successful, providing a fast, secure and safe mechanism for delivery of cash assistance. The pilot showed great potential to be rapidly scaled up.
Participation in the pilot project was entirely voluntary. Only those who chose to receive their cash assistance in this manner did so. Come of the displaced people we approached opted not to be part of this pilot, mentioning reasons such as limited understanding of the advantages of digital wallets and limited trust in digital money transfers. This proves how essential investing in digital literacy would be for this program to be scaled-up and implemented in other contexts.
This pilot ran in parallel with much broader scale cash distribution programs which have been underway in Ukraine since the beginning of the war. Participating in the pilot had no influence on whether or not people would receive assistance.
We don’t envisage that the program will be the best solution in all contexts. In Ukraine, the pilot was designed to be relevant to the situation there and the needs. Ukraine is a country with high ownership of mobile phones and a population that is digitally literate.
When evaluating the program for other regions, we need to assess digital literacy, possession of smart phones and the financial ecosystem and take into account a variety of factors such as sanctions if they exist, foreign exchange restrictions and monetary policy.
Compared to a traditional UNHCR intervention, what advantages did the use of blockchain technology bring?
This solution enhances the speed, efficiency and flexibility of cash-based inventions. It allows instant delivery of aid using an efficient and integrated blockchain network. It is fast, portable and provides options for encashment that offer greater flexibility for beneficiaries. It enables cash provision for those without a bank account.
Traditional methods of cash disbursement often require refugees/displaced people to carry cash, which puts them at risk when crossing borders. With this solution, funds can be held or transported in digital form safe from theft or loss.
It provides transparency for organizations and donors through the traceability of funds and real-time reporting throughout delivery, “end to end”.
The digital wallet also provides monetary store of value and stability in hard currency: Digital currencies, such as the US$ Coin (USDC) or EURO Coin (EUROC) are fully reserved stablecoins (1Coin = 1 US$/EUR in Fiat money at all times); stored on the digital wallet, provide a store of value in digital format, thereby safeguarding the value denominated in US$ or EURO, providing protection to the recipients from devaluation in local currency. Encashment options are made available in compliance with the local regulations in fiat: US$, EURO, or local currency, with options to transfer monetary value directly onto existing bank accounts, and debit/credit cards.
Funds can also be used and accessed from anywhere as per the selected cash-out design options, and are portable on the mobile phone, and digital wallet across country borders. The selected MoneyGram integrated network, providing the off-ramps and cash-out points, is well established, with available MoneyGram cash-out locations in over 175 countries, in multiple currencies. The cash-out option and selection of financial service providers are assessed and designed contextually appropriate to each location, with key criteria for utility and access to local financial ecosystems and to markets to consume the aid assistance.
What developments can your Humanitarian Agency’s work have through the use of blockchain technology tools?
As the number of forcibly displaced people and humanitarian crises across the world increases, UNHCR aims to harness new technologies to deliver aid to more people, faster and more securely. As part of our commitment to explore innovative solutions, this integrated blockchain payment system for digital cash disbursement to displaced people, allows us to reach those in need with speed, agility and accountability.
The success of the pilot program means we can scale up in the future to provide this solution in other contexts. As we scale up, we will continue to evaluate the effectiveness of the program.
Use of this new technology in humanitarian contexts is promising. However, implementing blockchain solutions in a particular location requires contextual analysis to meet the needs of the most vulnerable people and understand the specific country context and financial ecosystems. This will complement other programs already in place and where appropriate.
There are pre-requisites for this digital solution to be expanded and used in more remote humanitarian contexts. Telecommunication and banking connectivity must be made possible by telecommunication companies and/or by internet access. If these pre-requisites are met, UNHCR, together with its partners, will be able to adapt the design to the local context and provide humanitarian aid, including in remote humanitarian contexts, through this digital solution.