Aid
Use of cryptocurrencies allows children’s agency to bypass fees of moving cash overseas quickly and increase financial transparency
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Wed 9 Oct 2019 07.00 BSTLast modified on Wed 9 Oct 2019 07.46 BST
Cryptocurrencies are not linked to any single country or central authority, which allows non-profit organisations to avoid expensive fees. Photograph: Getty Images
The UN children’s agency, Unicef, has announced it is accepting and disbursing donations through cryptocurrencies ether and bitcoin.
Unicef’s new Cryptocurrency Fund is the latest in a series of efforts by aid organisations to experiment with “blockchain” currencies, which have the potential to transform charitable giving and increase financial transparency.
Cryptocurrencies are virtual currencies that can be cashed in for real money, and are not linked to any single country or central authority. Instead, a ledger of transactions is maintained by a decentralised network of computers.
This system of decentralisation offers non-profit organisations the advantage of bypassing expensive fees and middlemen traditionally required to move large amounts of cash overseas quickly.
But the virtual currencies have also been divisive. They are associated with huge price fluctuations, and have been previously used as a mechanism to support illicit activities such as money laundering and online drug dealing.
Christopher Fabian, principal adviser at Unicef Innovation, said the initiative would prepare the organisation for the future while also maintaining safeguards built into existing donor systems. “We see this as a piece of learning that we need to go through to prepare for the next decade,” he said.
For aid organisations, cryptocurrencies make tracking donations easier, and have the potential to allow donors to see how their money is used.
“There’s an interest in speed and efficiency,” said Fabian. “We have a good capacity to move money globally, but there’s always friction.”
Recent years have seen a mushrooming of cryptocurrencies – even Facebook launched its own coin – the libra – in 2019. Interest from philanthropic organisations in virtual currencies has seen the creation of AidCoin and Pinkcoin, tailored for the aid sector.
Unicef joins a number of aid agencies that have started accepting donations in virtual coins, including the American Red Cross and the UN World Food Programme.
Rhodri Davies, head of policy at the Charities Aid Foundation, said that the initial excitement about currencies using blockchain technology in the aid sector had delivered smaller windfalls than had been hoped. “It’s been a lot slower than people might have expected two or three years ago,” he said.
He said successes of the cryptocurrency donation model were largely limited to internet-based charities – to organisations such as Wikimedia or the Electronic Frontier Foundation.
In 2019, Fidelity Charitable, a charity that distributes money through donor-advised funds in the US, reported receiving donations of $106m (£87m) in virtual money since 2015 – though volatility in the currencies may have affected the value of the donations.
The new Unicef fund will hold donations and disburse them in the same cryptocurrency – initiatives funded through it will sign contracts denominated in the same type of virtual coinage.
Fabian said to reduce risks caused by the currencies’ volatility, most of the initial projects funded in this way would be short-term.
He said the organisation would also uphold existing donor protocols – so those making donations online would have to pass rigorous checks before they were allowed to deposit funds to Unicef.
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The UN children’s agency, Unicef, has announced it is accepting and disbursing donations through cryptocurrencies ether and bitcoin.
Unicef’s new Cryptocurrency Fund is the latest in a series of efforts by aid organisations to experiment with “blockchain” currencies, which have the potential to transform charitable giving and increase financial transparency.
Cryptocurrencies are virtual currencies that can be cashed in for real money, and are not linked to any single country or central authority. Instead, a ledger of transactions is maintained by a decentralised network of computers.
This system of decentralisation offers non-profit organisations the advantage of bypassing expensive fees and middlemen traditionally required to move large amounts of cash overseas quickly.
But the virtual currencies have also been divisive. They are associated with huge price fluctuations, and have been previously used as a mechanism to support illicit activities such as money laundering and online drug dealing.
Christopher Fabian, principal adviser at Unicef Innovation, said the initiative would prepare the organisation for the future while also maintaining safeguards built into existing donor systems. “We see this as a piece of learning that we need to go through to prepare for the next decade,” he said.
For aid organisations, cryptocurrencies make tracking donations easier, and have the potential to allow donors to see how their money is used.
“There’s an interest in speed and efficiency,” said Fabian. “We have a good capacity to move money globally, but there’s always friction.”
Recent years have seen a mushrooming of cryptocurrencies – even Facebook launched its own coin – the libra – in 2019. Interest from philanthropic organisations in virtual currencies has seen the creation of AidCoin and Pinkcoin, tailored for the aid sector.
Unicef joins a number of aid agencies that have started accepting donations in virtual coins, including the American Red Cross and the UN World Food Programme.
Rhodri Davies, head of policy at the Charities Aid Foundation, said that the initial excitement about currencies using blockchain technology in the aid sector had delivered smaller windfalls than had been hoped. “It’s been a lot slower than people might have expected two or three years ago,” he said.
He said successes of the cryptocurrency donation model were largely limited to internet-based charities – to organisations such as Wikimedia or the Electronic Frontier Foundation.
In 2019, Fidelity Charitable, a charity that distributes money through donor-advised funds in the US, reported receiving donations of $106m (£87m) in virtual money since 2015 – though volatility in the currencies may have affected the value of the donations.
The new Unicef fund will hold donations and disburse them in the same cryptocurrency – initiatives funded through it will sign contracts denominated in the same type of virtual coinage.
Fabian said to reduce risks caused by the currencies’ volatility, most of the initial projects funded in this way would be short-term.
He said the organisation would also uphold existing donor protocols – so those making donations online would have to pass rigorous checks before they were allowed to deposit funds to Unicef.
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... we have a small favour to ask. More people are reading and supporting The Guardian’s independent, investigative journalism than ever before. And unlike many new organisations, we have chosen an approach that allows us to keep our journalism accessible to all, regardless of where they live or what they can afford. But we need your ongoing support to keep working as we do.
The Guardian will engage with the most critical issues of our time – from the escalating climate catastrophe to widespread inequality to the influence of big tech on our lives. At a time when factual information is a necessity, we believe that each of us, around the world, deserves access to accurate reporting with integrity at its heart.
Our editorial independence means we set our own agenda and voice our own opinions. Guardian journalism is free from commercial and political bias and not influenced by billionaire owners or shareholders. This means we can give a voice to those less heard, explore where others turn away, and rigorously challenge those in power.
We need your support to keep delivering quality journalism, to maintain our openness and to protect our precious independence. Every reader contribution, big or small, is so valuable. Support The Guardian from as little as £1 – and it only takes a minute. Thank you.
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