Driving Global Impact with USDC and Stablecoin Payments

Easier, more cost-efficient access to dollars

Non-governmental organizations and intergovernmental organizations (which, collectively, I’ll refer to as “aid organizations”) that operate in some of the most challenging environments around the world frequently struggle to access financial services. These organizations often experience transaction delays and declines that hurt their ability to send and receive funds, and are sometimes outright denied access by traditional financial institutions. 

Under these conditions, without reliable financial services, it’s often difficult — if not impossible — to deliver traceable, efficient, and effective humanitarian aid to some of the world’s most vulnerable people in their time of greatest need. Even when aid organizations are able to get access to funds, their beneficiaries frequently experience their own challenges in accessing funds from the banking system or using and saving cash disbursements.

The internet aid distribution opportunity¹

*Data from The World Bank

Many of the challenges that aid organizations have are tied to government regulations that exist to counter money laundering and terrorist financing,  resulting in an overcorrection by financial institutions. Anti-money laundering compliance programs aimed at detecting, deterring, and preventing illicit finance risks have led financial institutions to exclude entire categories of customers or regions they deem high risk (a practice is known as de-risking). Traditional financial institutions have also essentially exited unprofitable markets under the guise of mitigating illicit finance measures. 

While government regulations in the U.S. and abroad have helped protect the international financial system from abuse from illicit actors, rational policies often have unintended consequences. 

Even when financial institutions are willing to facilitate transactions that fall into these categories, their own verification and risk management processes often delay distribution for weeks or months. Aid organizations’ efforts are further complicated when they operate in countries with authoritarian governments that can forbid foreign transactions and confiscate inbound and outbound aid dollars. 

I worked on both sides of this issue during my time at the U.S. Department of the Treasury. I led work to counter illicit financing in Africa and Latin America and spent countless hours with my colleagues helping the U.S. government do all it could to stop illicit actors — which included  terrorists, human and drug traffickers, corrupt politicians and oligarchs, and human rights abusers — from using the international financial system to move their funds. 

However, at the same time, I saw firsthand how aid organizations — many of which had a U.S. presence — had challenges accessing, sending, and distributing funds because of the perceived risk associated with them, their partners, and the regions in which they were operating. While financial institutions and other covered entities are responsible for the customers and transactions they facilitate, they are supposed to make calculated, risk-based assessments. In reality, financial institutions were categorically refusing to do business with regions, countries, and industries that posed any type of risk, including aid organizations. 

The Treasury's long-time, continued focus on facilitating financial services to aid organizations is commendable. In December 2022, the United States led the development of United Nations Security Council Resolution (UNSCR) 2664 to specifically address some of the challenges associated with providing humanitarian assistance in jurisdictions that have United Nations sanctioned programs or groups. Treasury’s follow-on implementation of the UNSCR was the first in the world. 

Even more recently, Treasury issued the 2023 De-Risking Strategy, which noted that “financial institutions may de-risk due to drivers such as profitability, reputational risk, lower risk appetite, regulatory burdens or unclear expectations, or sanctions regimes” and makes recommendations to overcome the unintended side-effects of de-risking.

Despite these efforts by the U.S. government (and governments in other countries, which are ongoing but not detailed here) to counteract the challenges of de-risking, aid organizations are still suffering from a lack of access from traditional financial institutions. In this environment, innovative financial services providers have stepped in to fill the gap.

Distributed ledgers enhance speed and transparency

Distributed ledger technology, or blockchains, can enable individuals and companies to send digital assets almost instantly, with low fees (particularly when compared to traditional financial rails), and with the transparency that comes with blockchains’ immutable, public ledgers. Critically, because blockchains do not rely on traditional financial rails, they help reduce many of the “last mile” barriers that can make it hard for aid organizations to reach those in need. 

Operating with these tools, aid organizations have greater transparency and insight into transaction flows, minimizing much of the opacity around alternative cash-based disbursements. Shifting aid payments to blockchains can also help aid organizations overcome much of the operational friction that has historically resulted in unintended delays and high fees. 

The emergence of a digital dollar like Circle’s USDC has given aid organizations a way to take advantage of all of these benefits while having access to U.S. dollar-based liquidity. USDC operates like a digital U.S. dollar. Powered by the speed of the internet, it moves like other types of internet data, such as email and video. 

USDC is native to many blockchains designed specifically for speed, cost efficiency, and high throughput. USDC transactions can settle in seconds, while cross-border payments in the traditional financial sector are frequently measured in days or weeks. Being able to send and receive money in seconds or even milliseconds can help aid organizations and their recipients avoid delays in receiving critical financial assistance. 

Further, the focus on low transaction costs can help mitigate some of the high fees traditionally seen in this space, estimated at 6.3%² for traditional remittances.

Global remittance data

Importantly, USDC has price parity with the U.S. dollar, unlike other digital currencies. This provides an important hedge against the inflation of other government-issued currencies and enables aid organizations and the communities they serve to have confidence in its value over time. Circle’s partnership with the Stellar Development Foundation – the organization that supports the growth and development of the Stellar network – and MoneyGram International on Stellar Aid Assist allows USDC holders to easily convert USDC directly into local currency, also making it possible to use locally.

Making an impact with USDC

More broadly, in times of war, natural disaster, or other humanitarian crises, access to banks and other on-the-ground financial institutions can be unreliable or even impossible. Digital wallets on internet-connected devices represent a viable alternative that enable people to send, receive, and access cash from participating services like MoneyGram, which offers USDC cashouts in more than 200 countries⁴ via the Stellar network.

For example, Circle recently began working with the United Nations High Commissioner for Refugees (UNHCR) on a pilot to send USDC on Stellar to internally displaced persons in Ukraine instead of disbursing cash. This program is a first-of-its-kind solution to deliver instant and transparent digital aid at scale. Recipients are able to secure and save USDC in Vibrant, a Stellar-enabled digital wallet, accessible on a smartphone, with the option to cash out at any MoneyGram location in the world, in addition to standard aid disbursement choices. Because of the transparent nature of blockchain, UNHCR is able to monitor the flow of aid to user wallets sent via the Stellar blockchain, mitigating potential fraud and ensuring individuals can access funds without a bank account. 

We have also seen USDC being used to bypass governments that are hostile to their own people while limiting external financial flows. In the height of the COVID-19 pandemic, front-line medical workers in Venezuela lacked access to critical medical supplies and equipment while suffering from the impacts of hyperinflation, international isolation, sanctions, and economic collapse. In collaboration with the Juan Guaido-led Bolivarian Republic of Venezuela and U.S.-based fintech Airtm, and in coordination with the U.S. government, Circle was able to put in place an aid disbursement pipeline that used USDC to bypass the controls imposed by Maduro over the domestic financial system, and put millions of dollars of funds into the hands of healthcare workers fighting for the health and safety of the people of Venezuela.

Let’s connect

Given the work that Circle has already done in this space and the constant innovation from the broader industry to improve access to financial services, I am optimistic about bringing the benefits of digital dollars to aid organizations operating around the world. In the five years since launching USDC, Circle has built extensive dollar digital currency infrastructure that has been tested and proven. Our commitment to open-source means we can adapt our infrastructure for essentially any situation an aid organization could face. Reach out to me anytime so that we can explore how to partner together.