Preparing for an inclusive, digitally financed future

UNICEF's prototype CryptoFund allows us to safely, efficiently test digital transactions. Here’s why we continue to explore this space, and how it could change futures for the most vulnerable.

Sanna Bedi, Innovation Fund Officer, and Arun Maharajan, Blockchain Lead
On 19 October 2020 in the Monte Sinaí neighbourhood of Guayaquil, Ecuador, Denisse Toala (right), 17, looks at her phone with her mother, Mercedes Marisela, 42, in their home.
19 January 2022

The UNICEF CryptoFund, launched in October 2019, is the first cryptocurrency-denominated financing vehicle within the United Nations (UN). In fact, it is the first use of cryptocurrency, without converting to local currency (known as fiat), within the UN system.  

It comes as no surprise that the world is becoming more connected and digital. The COVID-19 pandemic has only accelerated this trend, shifting everything from work to school to socializing into a technologically charged reality. In terms of the digitization of finance, we have seen countries like Kenya having 87% of their Gross Domestic Product (GDP) transacted digitally, as well as the EU launching the Digital Euro Project. Considering these trends, UNICEF’s Office of Innovation has been exploring the use of digital currencies, including cryptocurrencies, and how it might have an impact on the work that UNICEF does. 

With schools shut, rekha continues her studies on her phone

Cryptocurrency and Emerging Markets 

Cryptocurrency usage has fared strongly across emerging market countries, which are leading the world (outside of the US) across key crypto metrics - highest adoption rate, highest trading volume, and highest level of mining.  

Among the top 20 crypto-adopters - most of which could be classified as emerging or developing nations - crypto usage has been both bottom-up and top-down, as governments have explored and recognized the utility of the digital currency at the macroeconomic level.

This has been especially noticeable in bottom-up contexts where the costs or barriers to using financial products are high or prohibitive, currencies weaker or less stable, and financial intermediaries and intermediaries can be unreliable or unfavorable. A growing use-case for this is crypto remittances, which have proved to be a lifeline for vulnerable people in emerging market countries, particularly in the midst of the COVID-19 pandemic.  

Governments too are exploring top-down approaches to crypto adoption, such as blockchain-based fiat currencies (Central Bank Digital Currencies - CBDCs) - issued by a government’s central bank - that could bring financial inclusion and market access to millions of underserved or unreached people. Since its launch in October 2020, Cambodia's digital currency Bakong has directly or indirectly benefited more than 5.9 million users, with over $500 million in digital transactions made in the first half of 2021 alone. Bakong not only offers a lower-cost alternative to traditional interbank transactions, but it also seeks to bring more users into the financial system and provide seamless systems for cross-border payments. 

To date, 87 countries (more than 90% of the world's GDP) have explored the issuance of a digital currency. Of these, 9 countries have fully launched a CBDC, the latest being Nigeria's e-Naira. Fourteen countries are at the pilot stage, 16 CBDC projects are in development, while almost half of the total countries tracked are researching the extent and scope of CBDCs. While CBDCs remain the predominant trend in government-led crypto facilitation, it's interesting to observe a different approach being taken by the government of the Philippines. Under guidelines issued by the Philippines' central bank (BSP), all entities that use or enable blockchain-based financial services will be subject to the bank's licensing requirements. By introducing this framework, the BSP aims to assert regulatory control over cryptocurrencies to prevent their use for illicit purposes, such as money laundering or terrorism, while also encouraging financial innovation.  

Overall, growth of the crypto market is expected to surge ahead, given the acceleration of crypto due to market interest in new use-cases such as Non-Fungible Tokens (NFTs), decentralized autonomous organizations (DAOs), etc., aggressive VC investments and progress in distributed ledger technologies. Research suggests a CAGR growth of between 7-15% in the next decade

However, certain factors could be at play which could hinder this surge. Uncertain regulatory landscape could stunt growth, for example governments could make a sudden U-Turn with their view towards cryptocurrency (as was seen with China’s recent ban of crypto); or choose to tax crypto earnings similarly to other regulated assets within grey areas of regulation (as is still to be determined in India). As far as the consumers are concerned, the lack of internet connectivity in developing countries or the technical skills to directly interact with blockchains could slow down growth despite increasing interest. Relying on exchanges or other middlemen, who can always either engage in fraud or tighten the screws with high or unpredictable fees or be exposed to cyber attack  continue to be a risk until the skill-gap can be bridged or regulations become stricter. 

Syrian children use a smart phone outside a Technology Room especially created to provide children creative and learning experience at New Damietta Primary Health Centre in Damietta Governorate. Egypt.

The UNICEF CryptoFund is a vehicle for new opportunities, efficiencies, and explorations 

As digital currencies see record adoption globally, UNICEF’s ability to hold, receive and invest in cryptocurrency through the CryptoFund has allowed us to expand services and opportunities for people around the world.  

The CryptoFund created opportunities for new partnerships, unlocking new resources for children. UNICEF has new crypto and non-crypto donors that are interested in supporting the Fund, both technically and financially, for the first time because of our work with cryptocurrencies.  

There has been a dramatic increase in the efficiency and transparency of investments made by UNICEF. Using cryptocurrency as compared to traditional fiat investments has helped improve speed and cost of transactions. 100% of transactions are publicly viewable and the transfer of assets can take place in under a few minutes. To date, UNICEF has spent less than .01% on transfer fees and the average settlement time for each transaction (i.e., transfer of funds to a startup) was under 10 minutes.

Cryptocurrency-denominated investments have provided a unique benefit to startups we have funded.  

  • Startups have been able to benefit from the domain-specific expertise of new partners through technical assistance and mentorship to accelerate the development of their solutions. 
  • Startups mentioned that crypto funding allowed them to hire the best talent around the world and easily make payments to their staff. Many of the top developers around the world prefer payment in crypto rather than fiat currency, meaning our startups present an enticing offer. 


“We received both BTC and ETH, and from our perspective, crypto has allowed payment efficiency. Having access to crypto made it easier for us to hire top talent from overseas. So having crypto meant having access to the best developers.”

Marcio Degiovannini, Atix Labs, Argentina
  • Startups have also noted that they have benefited from the low cost of making transfers, as opposed to traditional money transfer options, as well as the ability to send payments more easily across borders.  

“As a startup based in Argentina, receiving cryptocurrency is a major advantage, as government policies don't allow us to receive US dollars and keep the funds in the foreign currency. Moreover, we must liquidate foreign investment at the official exchange rate, more than 50% lower than the one in the market. Our inflation rounds from 2% to 3% monthly, so this was a great opportunity to receive and stay in another currency.”

Antonella Perrone, CTO, Xcapit Labs, Argentina 
  • Given the transparent nature of crypto, financial reporting on behalf of the company is far easier. By offering cryptocurrencies to startups, UNICEF is uniquely positioned in the venture capital space. 

“We have received both fiat currency through international bank transfer and cryptocurrency. We find the value transfer across jurisdictions much easier with cryptocurrency. Also with cryptocurrency funds the expense transactions are transparent and trustless.”

Gabriela Guerra, Founder, BX Smart Labs, Mexico 

There is an increasing interest within UNICEF and the UN to learn about blockchain and cryptocurrency; and the Fund is facilitating learning courses to foster the innovation community around blockchain and cryptocurrency.  

"We are living in an ever more digital future, and the CryptoFund is positioning UNICEF uniquely in the landscape of humanitarian organizations understanding the new realm of digital assets. The aim of the Fund is to shape how the technology is developing and to keep the needs of certain communities in the spotlight as the technologies evolve."

Sunita Grote, Lead, UNICEF Ventures, Office of Innovation

Crypto and the Environment 

As we explore new technologies, we have a duty to ensure that they not only help us solve current problems, but also that they do not create future ones. Cryptocurrency mining operations do use energy. Some use more energy than they would like, and many blockchains are looking at more efficient ways of operating (i.e., reducing the energy consumption required); and this is something that UNICEF continues to monitor.  

While cryptocurrency mining operations use energy, research shows that much of that energy used is excess energy or from renewable sources. Overall, we should consider the amount of energy used by cryptocurrency compared to the global banking system. Many blockchain applications run on a private blockchain network, which require very minimal energy to run, similar to any other type of application. Furthermore, cryptocurrencies present an opportunity to accelerate the global energy transition to renewables by serving as a complementary technology for clean energy production and storage.  

An example is the recent boom in NFTs that has turned the spotlight on Ethereum, where most NFTs are bought and sold. Currently, a single Ethereum transaction consumes as much electricity as an average U.S. household uses in a workweek. However, Ethereum is set to launch its most significant upgrade ever – the transition from Proof of Work to Proof of Stake in 2022, promising to cut the network’s energy consumption by more than ~99%, positioning the blockchain as the big “green” choice for crypto users and developers. The product of more than five years of R&D, Ethereum 2.0 (or Eth2) has the explicit aim of making the fast-growing blockchain “more scalable, more secure, and more sustainable.” 

When engaging with blockchain, it is important to assess comparatively the use of energy of a particular network and weigh it sufficiently against the benefits.