U.N. inspectors find promise and hype with blockchain technology

GENEVA — An independent examination into the United Nations' early adoption of blockchain technology found at least 10 agencies use it and many others plan to despite environmental concerns, data privacy and cybersecurity risks, and potential illegal misuses.

The blockchain technology that powers Bitcoin and other cryptocurrencies is mostly being used in field operations to manage supply chains, digital payments, tracing of livestock, digital identities and land registrations, according to the Geneva-based Joint Inspection Unit, or JIU, the U.N.'s independent and external oversight body, which noted that most organizations are considering future uses.

Blockchain is a database or chain of digital blocks with records of transactions shared across a network of computers called “nodes.” A record is difficult to change once it is added to a chain.

That added level of security makes blockchain "a strategic topic of considerable potential and the United Nations should do more to understand it and identify efficient uses enabled by this technology," the JIU concluded in a little-noticed 78-page report on blockchain technology earlier this year.

"Blockchain applications can help organizations to reduce transaction costs, enhance efficiency and effectiveness, lower the risk of fraud, control financial risk and protect data," it said. "On the other hand, in view of some of its characteristics (decentralized consensus mechanisms, possible anonymity of users, energy imprint), some of the main features of blockchain can raise ethical problems, ecological concerns and legal issues."

The report notes that some organizations have begun using it to encourage new financing for development through two main ways: either crowdfunding or establishing a new fund with cryptocurrency. U.N. Women used the Binance Blockchain Charity Foundation to raise US$1.4 million in cryptocurrency donations for flooding victims in western Japan in 2018.

The UNICEF Crypto Fund, launched in 2019, is a new financial vehicle allowing the agency to receive, hold, and disburse bitcoin and ether donations and invest them directly into blockchain startups. "UNICEF reported that by accepting and disbursing cryptocurrency, transactions are not only transparent, but they happen faster with fewer intermediaries and at a low cost," the report says.

'Interest will grow and mature'

As the report was being prepared, JIU says, 10 organizations within the U.N. family were using blockchain, either individually or in collaboration, and had a dedicated blockchain infrastructure in place.

Along with U.N. Women and UNICEF, the other organizations were the World Food Program, Food and Agriculture Organization, International Telecommunication Union, International Computing Center, U.N. Joint Staff Pension Fund, U.N. Habitat, U.N. Office of Information and Communications Technology, and U.N. Development Program.

WFP and U.N. Women are using blockchain to facilitate Syrian refugees' cash payments. FAO and ITU are making use of it in their work to help farmers manage their pigs in Papua New Guinea. UNDP is incorporating it to track the cocoa supply in Ecuador.

"Most organizations that are not using blockchain now, are considering a possible use in the future. Their interest will grow and mature as innovation in blockchain accelerates," the report says. "However, the resources used for blockchain are minimal and its history in the United Nations system is short: from 2017 to 2020."