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.