HUD Eyes Crypto Experiment, Raising Concerns from Government Workers
According to a meeting recording and other materials reviewed by ProPublica, the U.S. Department of Housing and Urban Development (HUD) is considering its first steps toward utilizing cryptocurrency. Three officials familiar with the matter confirmed this. Two officials told ProPublica that this initiative might be a trial run for the use of crypto across the federal government.
The discussions have raised concerns within the department, particularly regarding the possible payment of major federal grants in cryptocurrency. This is due to the nature of this uninsured digital asset, which is associated with financial speculation, significant value fluctuations, and transnational crime.
So far, the discussions have centered on experimenting with blockchain technology—the underlying technology that enables crypto—to monitor HUD grants. While blockchain advocates highlight its independent value for this purpose, experts point out that its main application is for crypto transactions.
“It’s just introducing another unregulated security into the housing market as though 2008, 2009 didn’t happen,” one HUD staffer said, referencing the subprime mortgage crisis. The official, who like others in this article, spoke on the condition of anonymity for fear of retribution, added, “I don’t see any way this will help anything. I see a lot of ways this could hurt.”
The HUD discussions have also considered the possible use of a stablecoin, a form of crypto designed to avoid significant value swings by being pegged to another asset. However, such swings have occurred in the past.
Irving Dennis is pushing the blockchain idea, a HUD official informed colleagues. Dennis is the agency’s new principal deputy chief financial officer and previously worked as a partner at EY, the global consulting giant also known as Ernst & Young. EY is also involved in the proposal; an executive from the firm discussed the idea with HUD officials last month.
The crypto industry has found an ally in President Donald Trump. His administration has appointed industry supporters to lead federal agencies, eased investigations into crypto firms, and established a “strategic Bitcoin reserve.” (Bitcoin’s value dropped by $5,000 within an hour of the news regarding the reserve’s opening on Thursday.) Trump himself has considerable financial interests in crypto. The White House is scheduled to host a “crypto summit” with leading industry figures on Friday.
The HUD proposal suggests a new strategy for the administration to support the industry. This involves integrating blockchain and potentially cryptocurrency into the everyday spending and accounting practices of federal agencies. This move aligns with Trump advisor Elon Musk’s apparent interest in using blockchain to monitor federal spending.
Both Dennis and HUD spokesperson Kasey Lovett refuted their colleagues’ accounts. “The department has no plans for blockchain or stablecoin,” Lovett said. “Education is not implementation.”
Robert Judson, the EY executive participating in the discussions, confirmed that they took place. “We as a firm were having discussions with select individuals at that agency,” he said over the phone. Judson said he would seek EY’s approval for a full interview but did not call back.
The White House, EY, and Musk have not responded to requests for comment.
HUD officials held at least two meetings last month regarding the blockchain proposal. A list of attendees at the first meeting included staff from the offices of the CFO and Community Planning and Development (CPD). CPD manages billions of dollars in grants that support low- and moderate-income individuals, including funding for affordable housing development, homeless shelters, disaster recovery, relocation of domestic violence survivors, and construction of parks, sewers, and community centers. One source told ProPublica that the CFO’s office called the meeting.
Judson from EY was also listed as a meeting attendee. For years, Judson has advocated for blockchain—a digital ledger of sorts that creates an immutable record of transactions saved across multiple computers. Proponents portray the technology as a way to eliminate intermediaries such as banks and make transactions more transparent and secure. According to Judson’s writings, blockchain can help organizations prevent funds from being diverted for unintended purposes. “As digital assets such as stable coins or digital currencies take hold, more powerful applications will emerge for integrated value exchange,” he wrote. Dennis, who served as HUD CFO in the first Trump administration, also wrote in a 2021 book that the agency should use technology such as “blockchain, robotics, and next-generation financial management systems.”
Stablecoins are backed by reserves, including traditional currency, commodities, and Treasury securities. This is intended to prevent their value from fluctuating, unlike Bitcoin. However, the value of stablecoins has indeed fluctuated on multiple occasions.
During the HUD meeting, attendees discussed a “proof of concept” project in which CPD would start tracking funding to a single CPD grant recipient and possibly subrecipients on the blockchain. One attendee later wrote in the meeting notes that the need for the project was “not well articulated.”
In the aftermath of the meeting, a HUD official wrote and circulated a memo within the agency criticizing the idea. The memo states, “Without exaggeration, every imaginable implementation of this at HUD appears dangerous and inefficient.”
The memo argued that HUD has no difficulty tracking grant spending, making the new technology unnecessary. Implementing it would be time-consuming, complex, and require extensive training. Furthermore, paying grantees in cryptocurrency instead of dollars would introduce volatility and unpredictability into the funding stream, even if the currency was a stablecoin.
In subsequent discussions with HUD staff, the memo’s author described the proposal as a “beachhead” at HUD for introducing cryptocurrency, which the author compared to “monopoly money.”
In a follow-up meeting, CPD officials continued to voice their concerns; ProPublica reviewed a recording of this meeting. (Judson did not attend.) Some attendees saw value in the blockchain idea, suggesting it could reduce inaccurate data from grant recipients and allow for real-time reporting and monitoring of their spending.
“Maybe there is something that we could learn from it,” one attendee said, “especially if we feel like the broader federal government is moving towards some sort of stablecoin option in the future.”
One official asked why the agency was considering the project. “Because it’s sexy,” someone replied. Another said, “Irv has asked us to pursue blockchain, so that’s why we are looking at it,” referring to Dennis.
Many details were left unexplained at the meeting, especially whether the proposal would involve paying grantees in cryptocurrency. However, some indicated that it would.
“You can do it with what would be attached to a stable currency. That would be up to Treasury, and I think they’re already going that way, for what it’s worth,” one official said. “It would simulate the dollar.”
Another added, “It would basically be a cryptocurrency that is linked to the U.S. dollar on a one-for-one basis.”
A finance official suggested the idea could be applied more broadly across HUD. “We are looking at this for the entire enterprise. We just wanted to start in CPD,” he said. The agency is also considering the idea for the Office of Public and Indian Housing, he said, for “tenant eligibility and stuff like that.” That office serves the millions of people who live in public and federally subsidized housing.
This is not the first instance of federal officials considering incorporating blockchain into government activities. Agencies like the Treasury Department, the Department of Commerce, and even HUD have participated in a study, a prototype, and a working group in recent years. However, those who monitor the crypto industry were unaware of such a broad application of the technology within the federal government as what HUD officials have recently discussed.
Some crypto experts expressed skepticism. “It’s a terrible idea,” said Corey Frayer, a former official at the U.S. Securities and Exchange Commission, where he focused on the crypto markets and financial stability. “It is absolutely wild that anyone with any sense would consider this.”
Frayer, now at the Consumer Federation of America, cautioned that HUD grants paid in stablecoin could decrease in value. He expressed significant concern about the proposal’s potential expansion to other agency divisions. If it involved, for example, introducing stablecoin into the $1.3 trillion in mortgage insurance provided by the Federal Housing Administration, a fluctuation in the stablecoin’s value could have significant economic repercussions, he said.
“Imagine a world in which all of the government involvement in the housing industry, all of the funds circulating in that environment, dropped in value by 13%,” he said, citing a 2023 episode in which a stablecoin briefly fell 13 cents below the dollar. “It’s hard to imagine that wouldn’t be catastrophic.”
Hilary Allen, a law professor at American University who researches financial regulation and technology, noted some high-profile attempts to use blockchain for purposes unrelated to cryptocurrency have failed. She expressed doubts that the technology would perform better in the context of government grants, where negative outcomes could harm those who depend on HUD funding to survive.
“Blockchain technology has been around for 15 years. No one wants to use it. And so now we have an attempt to force the government to use it,” she said, with “the most vulnerable people” serving “as guinea pigs.”
