Digital Assets Are The Future Of Relief Effortsbr>
In just a handful of months, the COVID-19 pandemic has disrupted everything we thought we knew about our preparedness for disasters. With well over 3 million confirmed cases around the world and over 234,000 deaths, the need to have reliable systems in place for accessing and dispersing relief funds is more apparent than ever.
If the coronavirus has taught us anything, it’s that despite warnings the world was not prepared for a disaster of this magnitude. Antiquated governmental procedures and financial institutions have delayed the processes for getting disaster relief into the pockets of the individuals who need it the most; thus prolonging and even worsening the consequences of the virus. Such a global problem calls for a global solution unlike any other we have seen in recent history, and one of the most obvious answers is staring us right in the face: digital currencies. Not only do digital currencies have the potential to vastly improve the speed at which people receive their relief money, but they can also broaden the reach of people who will be able to access these funds without the limitations of state or sovereign borders.
Regulators are missing the point…
Last month, US legislators had an unprecedented idea — instead of relying on traditional methods of dispersing relief funds, US citizens could be compensated via digital currency. Although this idea didn’t last very long, and certainly didn’t survive the rigors of legislative review, it has opened up a very relevant conversation about the role of cash versus digital currencies in an increasingly digital era.
The digital dollar that many House Democrats advocated for was reminiscent of a stablecoin. Every American would get their own “FedAccount” and digital coins that were backed by two “platinum” US coins would be sent to people who qualified for money from the stimulus package. Another idea that circulated was that people could receive physical cards that would be pre-loaded with these digital coins. Unfortunately, the government opted to rely on traditional methods for distributing payments instead.
There are inherent problems with dispersing relief funds through the more traditional methods. For one, sending physical money like checks and cash can take a long time, and for time-sensitive crises, the difference between an instantaneous transaction and a four-month waiting period is critical. On the other hand, not everyone wants the government to have direct access to their bank accounts. In fact, the people who elect to receive cash or checks are often avoiding giving the government their private bank account information, whether because they don’t have a bank account in the first place or because they simply enjoy their privacy.
Furthermore, one of the unique aspects of this particular crisis is that physical contact could have serious repercussions. Cashing a check, touching cash, or even going somewhere you can actually spend cash puts people at risk of getting the virus and violates many of the social distancing orders throughout the world.
While the recent conversations about the potential of digital currencies is great for the cryptocurrency and blockchain industries, regulators around the world and the populations they represent are really missing an opportunity here.
The real potential of digital currencies
While some institutions are only now joining the conversations about digital currencies, some institutions have already leveraged them as a way to distribute donations around the world. Last year, UNICEF announced that it would start accepting donations and dispersing them through Ethereum and Bitcoin.
UNICEF’s experimentation with cryptocurrency has been nothing short of a success, too. Money donated in crypto can be moved across the globe in a quicker, more efficient way. Because of the sovereign-free nature of cryptocurrencies, exchanging one currency to another is a non-issue. These frictionless transfers also bypass all the middlemen that come with money leaving a country and entering another, which allows the organization to move large amounts of coins around the world quickly.
UNICEF’s success proves that as the world continues to become more interconnected through technology and the internet, digital currencies are an inevitability. With that said, digital currencies still have their fair share of critics. Traditional finance experts criticize the volatility that is an inherent part of cryptocurrency markets. Additionally, they believe that liquidity and stability — which are essential in any financial crisis — are best found in the time-tested traditional finance realm.
But this argument doesn’t really hold up considering the way digital currencies have recovered from the March 12th crash. The market is much more robust than it was two years ago, and traders were able to hedge their portfolios with tools like crypto derivatives. And as for liquidity, exchanges like Bitfinex and eosfinex have earned industry-wide recognition with the most liquid digital assets based on order book depth.
All things considered, it’s undeniable that digital currencies are a better way to disperse relief funds domestically or internationally.
First, digital currencies have already proven themselves to be faster ways to send relief money. People can get the money they need, as soon as possible. This will help for speedier recoveries from the crisis, and it will help stimulate the economy at a quicker rate.
Next, since non-governmental organizations and international non-profit organizations are not beholden to using national currencies, they can also benefit from using digital currencies because they can be more easily transferred across borders without the same taxations and regulations as national currencies. Digital currencies eliminate the delays associated with exchanging currencies and can be transferred near-instantaneously, putting money in the “pockets” of the people who need it the most, when it’s needed the most.
And thirdly, this particular crisis requires money to be “contactless”. As people are abiding by orders to “shelter in place”, they are buying food and supplies on the internet. Since the quarantine began Amazon and other online stores have seen a tremendous uptick in purchases. As the quarantine continues, cash and checks will soon be rendered useless, as in-person transactions continue to be viewed as more risky.
Next steps for digital currencies
As the conversation about the benefits of digital currencies continues, in the meantime, there are a few things the crypto and blockchain industries can do to hasten the inevitable.
A transition to digital currencies will mean millions of people will be using cryptocurrency networks and exchanges. The industry can prepare for this mass adoption by further developing cryptocurrency and blockchain infrastructures.
Another aspect that will need to be thought out more thoroughly is what kind of systems and organizations will need to be set in place for digital currencies to work directly with the government and recipients of relief effort.
With that said, the crypto and blockchain industries are now starting to get on the radars of some of the most influential lawmakers and industries in the world. While coronavirus relief efforts have given them a moment to shine, they have also highlighted the work that the industries must do to reach their full potential.