Trump Wants to Put U.S. Foreign Aid on the Blockchain

According to a memo circulating within the State Department, the administration proposes renaming USAID to the U.S. International Humanitarian Assistance (IHA) and placing it directly under the authority of the Secretary of State. This restructuring is intended to streamline operations and align the agency more closely with national foreign policy objectives. The memo states that all aid distributions "would be secured and traced via blockchain technology to radically increase security, transparency, and traceability," encouraging innovation and efficiency among implementing partners.

Blockchain technology, best known for underpinning cryptocurrencies like Bitcoin, offers a decentralized and immutable ledger system. By implementing blockchain, the administration aims to create a transparent and tamper-proof record of aid transactions, ensuring that funds reach their intended recipients without mismanagement or corruption. This approach reflects a broader emphasis on outcomes-based funding, where payments are tied to measurable results rather than merely completing activities.

The proposal has elicited mixed reactions from experts and practitioners in the humanitarian sector. Linda Raftree, a consultant specializing in technology for development, expressed skepticism, stating, "It feels like a fake technological solution for a problem that doesn't exist." She argues that existing tools could achieve similar objectives without the complexity of blockchain integration. Similarly, Giulio Coppi of the nonprofit Access Now noted that while blockchain has potential, it doesn't necessarily offer substantial advantages over current technologies and could impose additional burdens on smaller NGOs.

Despite the skepticism, there have been instances where blockchain has been successfully employed in humanitarian efforts. In 2022, the United Nations High Commissioner for Refugees (UNHCR) conducted a pilot program providing cash assistance to Ukrainians displaced by the Russia-Ukraine war using a stablecoin. Additionally, the Kenya Red Cross Society tested blockchain solutions to enhance aid delivery. These pilots demonstrated that blockchain could offer faster and more secure transactions, though scalability and broader applicability remain questions.

Critics caution that introducing blockchain may not address the core challenges of aid distribution and could divert resources from more pressing needs. The necessity and cost-effectiveness of such technological solutions in humanitarian contexts are subjects of ongoing debate. Some experts argue that the focus should be on strengthening existing systems and addressing structural issues within aid organizations.

The proposed overhaul of USAID is part of a broader initiative by the Department of Government Efficiency (DOGE), a newly formed agency led by Elon Musk, aimed at eliminating waste and streamlining federal operations. DOGE has been tasked with reimagining how government agencies function, and its efforts include using emerging technologies like blockchain to drive transparency, accountability, and cost-effectiveness across various departments.

The integration of blockchain technology into USAID's operations could set a precedent for other nations and international organizations. If successful, it may lead to a broader adoption of blockchain in various sectors of public administration. However, the effectiveness of this initiative will depend on careful implementation, stakeholder engagement, and continuous evaluation to ensure that it meets its intended goals without unintended consequences.

As the administration moves forward with these plans, the global development community will be closely monitoring the outcomes to assess the viability of blockchain as a tool for enhancing transparency and efficiency in foreign aid distribution.