Digital currencies are now being distributed by the Red Cross to disaster victims to encourage economic activity, according to the Thomson Reuters Foundation.
Current solutions include the use of cash and vouchers, with up to $1 billion per year currently being distributed among disaster victims.
While these forms of exchange are vital for helping local communities get back on their feet, there’s still a lack of ‘hard cash’.
Loans and collective community savings are similarly underserved, with many records being kept in paper form and stored in a locked safe in the community.
These forms of money, which could be vital for communities recovering from disaster, are easy to lose, forge, or destroy.
Instead, the Red Cross is now trialling the use of distributed ledger technology to issue and track digital currencies for communities in need.
Mobile payments via blockchain
First trialled in Kenya and Ethiopia, the new digital cash is based on blockchain technology and can easily be transferred via mobile phone.
According to Reuters, this will allow people to be paid for labour and trade their digital currency for local produce and services rather than using traditional barter systems.
Will Ruddick, the founder of digital currency development foundation Grassroots Economics, told Reuters that the system lets users create their own automatic credit and savings pool with simple-feature phones, adding:
“It is also relatively cheap to run, at about $40,000 a year for servers and support to cover all of Kenya, following more than $1 million in initial start-up funding from Norway and other donors.”
Representatives from the Red Cross told Reuters that the digital currency, which can be traded back and forth multiple times, could be a key step in ending the “chronic cycle” of having to provide aid every three years.
Instead, the Red Cross digital cash can provide the basis for a strong and self-supporting economy following times of crisis.
Digital currencies such as Bitcoin have previously been used in countries such as Venezuela to alleviate economic problems, while birth records have been deployed on the blockchain in Tanzania.
However, this is one of the first times a charitable organisation has minted and deployed its own digital cash for aid purposes.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.