The U.S. Department of Housing and Urban Development (HUD) is exploring the use of cryptocurrency and blockchain technology for managing grants, according to meeting recordings and materials reviewed by ProPublica. Two officials familiar with the matter believe this initiative might be a trial run for broader cryptocurrency adoption across the federal government.
The discussions center on utilizing blockchain, the underlying technology behind cryptocurrency, to monitor HUD grants. While blockchain advocates argue that the technology has value beyond cryptocurrency transactions, experts note that its primary use is for crypto transactions. Some HUD staff members are concerned about the potential risks, particularly if recipients are paid in cryptocurrency, an uninsured digital asset associated with financial speculation and dramatic value swings.
Concerns and Opposition
One HUD staffer expressed strong opposition, stating, “It’s just introducing another unregulated security into the housing market as though 2008, 2009 didn’t happen.” The staffer continued, “I don’t see any way this will help anything. I see a lot of ways this could hurt.” The proposal involves considering a ‘stablecoin,’ a form of cryptocurrency pegged to another asset to minimize value fluctuations.
The idea is being promoted by Irving Dennis, HUD’s new principal deputy chief financial officer, who is a former partner at EY (Ernst & Young). EY is also involved in the proposal, with an executive discussing the idea with HUD officials. However, HUD spokesperson Kasey Lovett denied that the department has plans for blockchain or stablecoin implementation, stating, “Education is not implementation.”
Potential Applications and Risks
The discussions have included a ‘proof of concept’ project to track funding to a single grant recipient using blockchain. Some officials see potential benefits in reducing inaccurate data and enabling real-time spending monitoring. However, others have raised concerns about the complexity, need for extensive training, and potential volatility if grantees are paid in cryptocurrency.
Crypto experts have expressed skepticism about the proposal. Corey Frayer, a former SEC official, called it a “terrible idea,” warning that HUD grants paid in stablecoin could lose value. Hilary Allen, a law professor at American University, noted that previous attempts to use blockchain outside of cryptocurrency have failed and expressed concern about using vulnerable populations as “guinea pigs” for this technology.
Broader Implications
The proposal suggests a new way for the Trump administration to support the cryptocurrency industry by integrating blockchain and possibly cryptocurrency into federal agencies’ routine spending and accounting practices. This move aligns with the apparent desire of Trump adviser Elon Musk to use blockchain to monitor federal spending. The White House is scheduled to host a ‘crypto summit’ with industry leaders, further indicating the administration’s interest in cryptocurrency.
