The U.S. Department of Housing and Urban Development (HUD) is exploring the use of blockchain technology to monitor the employment of agency grants, according to a report by ProPublica. The proposal, which some staffers believe could be a “trial run” for wider deployment across the federal government, has sparked debate about the potential benefits and risks.
Background and Proposal
HUD’s consideration of blockchain technology comes as the department looks for ways to improve grant monitoring. The report cites a meeting where HUD officials discussed using blockchain, the underlying technology behind cryptocurrency, to track grant spending. Blockchain advocates argue that the technology is valuable for such purposes, allowing for greater transparency and security.
Concerns and Criticisms
However, not everyone is convinced that blockchain is the right solution. A HUD staffer, speaking on condition of anonymity, expressed concerns about introducing another unregulated element into the housing market, citing the 2008 housing crisis as a cautionary tale. “It’s just introducing another unregulated security into the housing market as though 2008, 2009 didn’t happen,” the staffer said. Other experts echoed these concerns, warning that using cryptocurrency for grants could introduce volatility into the funding system.
Industry Context
The mortgage industry has shown interest in blockchain technology for its potential to increase efficiency and reduce costs. A 2023 white paper by the Mortgage Industry Standards Maintenance Organization (MISMO) suggested that blockchain could reduce loan manufacturing timelines by at least 30% and costs by at least 25%. However, critics argue that HUD’s grant programs, which support vulnerable populations, are not the right place to experiment with this technology.
Official Response
HUD spokesperson Kasey Lovett denied the report’s claims, stating that the department has no plans to implement blockchain or cryptocurrency. “Education is not implementation,” Lovett said. Irving Dennis, HUD’s new chief financial officer and principal deputy, is reportedly a champion of the idea, having previously worked at consulting firm EY, which is also involved in the proposal.
Expert Opinions
Experts interviewed by ProPublica were largely critical of the proposal. Former SEC official Corey Frayer called it “a terrible idea,” citing the potential for grants paid in cryptocurrency to fluctuate in value. Law professor Hilary Allen, who studies fintech and regulatory spaces, expressed skepticism about forcing the government to use blockchain technology, suggesting that it could put vulnerable populations at risk.
The debate highlights the challenges of introducing new technologies into critical government programs, where stability and reliability are paramount.
