Trump Administration Proposes Blockchain for USAID Aid Distribution

The Trump administration has put forth a proposal to revamp the U.S. Agency for International Development (USAID) by incorporating blockchain technology into its procurement system. This initiative aims to bolster security, transparency, and traceability in aid distributions. The proposed changes include renaming USAID as the US International Humanitarian Assistance (IHA) and placing it directly under the secretary of state. The administration's memo outlines that all aid distributions would be secured and traced via blockchain technology, fostering innovation and efficiency among implementing partners. This approach is intended to shift the focus from completing activities and inputs to achieving tangible impact.

The memo, however, does not specify the exact implementation details, such as whether cash transfers would be conducted in cryptocurrency or stablecoin, or if a blockchain ledger would simply be used to track aid disbursement. The proposal comes at a time when USAID staff are grappling with uncertainty about their future. The agency was an early target of the Department of Government Efficiency, which has been headed by Elon Musk. Shortly after President Trump’s inauguration, the State Department placed the entire agency’s staff on administrative leave, reduced its workforce, and halted payments to partner organizations worldwide. A federal judge issued a preliminary injunction against the dismantling of the agency, but the memo suggests that the administration intends to continue its efforts to drastically cut USAID and fully integrate it into the State Department.

The plans for blockchain integration have surprised staffers, as few blockchain-based projects have achieved large-scale use in the humanitarian sector. Consultants and experts in the field have expressed skepticism about the necessity and effectiveness of blockchain technology in this context. A consultant who helps humanitarian organizations adopt new technology described the proposal as a "fake technological solution for a problem that doesn’t exist." A senior humanitarian officer at the nonprofit Access Now echoed this sentiment, stating that blockchain technologies offer no obvious advantages over existing tools and that the approach has been proven ineffective in reality.

Despite the skepticism, there have been some successful instances of using blockchain technology in the humanitarian sector. In 2022, the United Nations High Commissioner for Refugees (UNHCR) conducted a pilot program to provide cash assistance to Ukrainians displaced by the Russia-Ukraine war using a stablecoin. Other pilots have been tested in Kenya by the Kenya Red Cross Society, with the International Committee of the Red Cross also contributing to the development of the Humanitarian Token Solution (HTS). Representatives from NGOs that use blockchain technology have noted that stablecoins can be faster and easier for reaching communities impacted by disasters. However, they also highlighted the challenges of introducing new systems, particularly for small NGOs that often operate on the front lines of disaster response.

The proposed adoption of blockchain technology appears to be part of a broader effort to exert tighter controls over aid. The memo suggests that funding should be contingent on outcomes, ensuring that taxpayer dollars deliver maximum impact. However, a USAID employee noted that many of USAID’s contracts already function this way, with organizations being paid after performing their work. The employee also pointed out that such agreements are not always flexible enough for the dynamic environments in which USAID operates, such as conflict or disaster zones where situations can change rapidly. A consultant criticized the language in the memo, stating that it bolsters claims made by Musk and the administration that USAID was corrupt, which she described as misleading.