Crypto May Be the Future of Humanitarian Aid
Donations of digital currency like bitcoin can get money, and power, to people suffering under authoritarian governments
A video from San Cristóbal, Venezuela, dated March 2019 shows a never-ending line of people waiting on the street. They are all waiting, the narrator tells us, for their turn at the bank, hoping to withdraw money to buy food and goods before hyperinflation drives the value of Venezuela’s currency further into the dirt.
Venezuela’s political and economic crisis has been escalating since 2010. President Nicolas Maduro’s refusal to declare a state of national emergency means aid groups can’t intervene on the people’s behalf, and in February 2019 the government began to block shipments of supplies donated by U.S.-backed aid groups. Maduro feared the supplies would foster favor toward the U.S. and the leader it had recognized as legitimate in his place, Juan Guaido.
Many Venezuelan citizens have tried to leave the country, some hiding rolls of dollars in their hair to keep it from being stolen at the border. Venezuelans need a way to access the world economic marketplace that bypasses the regime’s control, a way to attain a degree of financial independence. And for some citizens of Venezuela, help has arrived in the form of bitcoin.
In countries where the government controls their people by controlling the money, digital currency can be a powerful solution for the oppressed.
As a cryptocurrency, bitcoin is built on a decentralized electronic ledger called a blockchain. That ledger isn’t controlled by any one person, but by multiple users around the globe running “nodes,” copies of the entire ledger, on their computers, which can’t be cut off or censored. Cryptocurrencies are stored in digital wallets, which can send or receive bitcoin from anywhere in the world — bypassing banks and paying far less in cross-border transaction fees. In countries where the government controls citizens by controlling the money, digital currency can be a powerful solution for the oppressed.
Alex Gladstein, chief strategist at the Human Rights Foundation and vice president of the Oslo Freedom Forum, says bitcoin is doing a lot to help the billions of people living in authoritarian countries. He told OneZero that around 95% of bitcoin transactions he sees are made under authoritarian governments because of the need for a better economic system. “It’s extremely early,” he says, “But what we’re seeing is really interesting.”
People who have never had a bank account are figuring out how to use bitcoin as a store of value, exchanging it person-to-person for fiat currency or goods, or sending it across borders in the form of remittance payments. Sending money abroad securely is vital, as theft is rampant at the Venezuelan border. “It’s about liquidity,” Gladstein says, adding that the Venezuelan border was “totally lawless.”
Venezuelans now need only a smartphone and internet access to trade bitcoin or other cryptocurrencies. They use WhatsApp to pay for goods or fiat currency, use LocalBitcoins to trade it, or the encrypted messaging app Signal to send currency to others. That allows them to be paid for freelance work they do online, save money to leave the country, and send money abroad without the regime knowing.
Authoritarian regimes are also trying to use cryptocurrency, though with less success than their people. Maduro launched a digital currency called the Petro in October 2018, supposedly backed by Venezuela’s rich oil reserves. The government required citizens to use it when buying a passport, and ordered the country’s largest bank to open Petro desks, yet the currency still hasn’t taken off with the general public. A region near the tiny town of Alta Pereira, where 5 billion barrels of oil were to be drawn from the earth to back the project, turned out to be nothing but a couple of dilapidated oil rigs, and the people living there didn’t even know what the Petro was. China also has a state crypto ready to launch as of 2019, and Iran has been mulling one since at least 2017.
Several organizations are using cryptocurrency to channel aid into Venezuela. Payment company Airtm started Airdrop Venezuela with the goal of sending $10 in cryptocurrency to 100,000 Venezuelan citizens via their app. It has raised more than $300,000 so far and already started distributing money. CEO Ruben Galindo told OneZero he decided to start his company after seeing banks freeze citizen’s assets with no warning, completely cutting them off from their money. In 2001, the Argentine government did exactly that to prevent a run on the banks and forbade withdrawals from U.S. dollar-backed accounts. Today, 65% of current Airtm users are Venezuelans. “Our aim is to become the biggest bank in the world,” says Galindo.
Bitcoin Venezuela and eatBCH both accept donations in bitcoin and other cryptocurrencies, and then exchange that money for local currency to be distributed to local people to buy food and supplies. “Crypto is borderless, it works everywhere, with everyone. That’s huge,” says José, one of the co-founders of eatBCH, who did not want to give his surname for fear of reprisals. He’s enthusiastic about the effect crypto has had on Venezuelan citizens through charity efforts like this, and promotes the project on Twitter. “There have been times when donors feel moved by someone in one of our pictures [and] contact us and then specially donate to that person or family, helping them immensely. There was one guy… when we told him that the meal we were giving him was free of any attachment, he started jumping around and thanking God.”
“If you tried to send that money through the bank you’d have the cops knocking on your door.”
GiveCrypto, a San Francisco-based nonprofit co-founded by the CEO of crypto exchange Coinbase, has raised $4 million in cryptocurrency donations, and claim 100% of that money is donated to people in need. From February to April of this year, the company made small donations of cryptocurrency to families in Venezuela, many of whom regularly have to skip meals because of the cost of food.
And it isn’t just Venezuela. Gladstein claims that an acquaintance in London used bitcoin to pay a relative’s medical bills in Tehran. It was the only avenue available to send cross-border payments given the current economic sanctions on Iran. “If you tried to send that money through the bank you’d have the cops knocking on your door,” says Gladstein.
Chinese importers in Russia are using cryptocurrency to bypass the government’s strict capital controls, buying up millions in a crypto called Tether designed to maintain parity with the U.S. dollar and sending it across the Chinese border from Russia. The Bill and Melinda Gates Foundation teamed up with the creators of cryptocurrency XRP last year to create Mojaloop, a digital payment platform designed for users without access to banks. Physical bitcoin ATMs that let users buy, sell, and send cryptocurrency without a smartphone have surged in popularity in developing countries, although they present a rare weak point, as governments can shut down or remove the machines.
The distributed ledger technology (DLT) on which cryptocurrencies are built can be used to keep any kind of public record, and not just financial transactions. Humanitarian organizations are piloting some exciting uses for DLT. Humanitarian Policy Group (HPG), a division of U.K. think tank the Overseas Development Institute, describes a recent project called Whiteflag which lets humanitarian groups share sensitive information such as the locations of hospitals on a secured blockchain. Only trusted entities with permission to access that blockchain can view the information. The World Food Programme’s Building Blocks food voucher project is built on the Ethereum blockchain, and recorded $1 billion in cash-based transfers in 2017, according to the HPG.
Cryptocurrencies are by no means perfect. Several high-profile hacks of crypto exchanges in recent years have lost investors a good deal of money, and the same anonymity that helps the oppressed can also aid criminal activity such as money laundering. “People have figured out how to use it to their benefit, but it’s totally agnostic; bad people can use it too,” Gladstein says. Power outages and restricted access to technology in developing countries are also major obstacles to more widespread cryptocurrency access. To reach mainstream adoption, policymakers also have to balance regulation and consumer protection — a difficult prospect given the decentralized nature of digital currencies.
This technology is in the earliest stages, especially in the humanitarian field. But it is helping people get around the economic restrictions authoritarian regimes use to control their citizens. And according to Galindo, people under authoritarian rule are good at finding ways to do the impossible. “You have to be a hustler to get around the problems you have as a Venezuelan commoner,” he said. “Cryptocurrencies present a great benefit to the people there.”