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The U.S. Agency for Housing and Urban Development is considering taking the first step towards using cryptocurrency, according to recordings and other sources from a conference reviewed by ProPublica and three officials familiar with the issue. Two officials told Propublica they believe the initiative is a trial run for the use of codes across the federal government.
This debate has raised concerns among some of the sector, particularly about the prospect of paying uninsured digital assets related to financial speculation, dramatic fluctuations in value, and beneficiaries of major federal grants for cryptocurrency, an uninsured digital assets related to cross-border crime.
The focus of the discussion so far is experimenting with the use of underlying technologies that enable cryptographic (blockchain) to monitor HUD grants. Blockchain advocates argue that the technology is valuable in itself for such purposes. However, experts say the main use of blockchain is crypto transactions.
“We’re just introducing another unregulated security into the housing market, as if 2008 or 2009 didn’t happen,” one HUD staff member said, referring to the subprime mortgage crisis. “I don’t know how anything can be useful. Like everyone else in this article, an official who spoke on condition of anonymity for fear of retaliation, states: The HUD discussion covers the potential use of Stablecoin, a form of cryptography that has occurred in the past, is fixed to another asset to avoid wild variability.
HUD officials told a colleague, according to Irving Dennis. Dennis, the institution’s new assistant principal’s financial director, is a former partner of global consulting giant EY and is also commonly known by his original name, Ernst & Young. EY itself is involved in the proposal. Company executives discussed the idea with HUD officials last month.
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The crypto industry has discovered an alliance with President Donald Trump. President Donald Trump tapped the industry booster that its management leads federal agencies, retreating investigations of crypto companies and creating a “Strategic Bitcoin Reserve.” (Bitcoin plunged $5,000 within an hour of the news of the reserve’s opening on Thursday.) Trump himself has great economic benefits in the crypto. On Friday, the White House is scheduled to hold a “cryptosummit” with key people in the industry.
The proposals at HUD show new ways the administration is trying to strengthen its industry. By incorporating blockchain and cryptocurrency into daily spending and accounting practices of federal agencies. This is a move that coincides with Trump’s advisor Elon Musk’s obvious desire to use blockchain to monitor federal spending.
Dennis and HUD spokesman Kasey Lovett both denied the accounts of their colleagues. “The department has no plans for blockchain or stubcoin,” Lovett said. “Education is not implementation.”
Robert Judson, the EY executive involved in the conversation, confirmed that they had happened. “As a company, we were discussing with individuals selected at that agency,” he said when we contacted him by phone. Judson told Propobrica that he asked EY’s approval for the full interview and did not call back afterwards.
The White House, EY and Musk did not respond to requests for comment.
HUD officials held at least two meetings last month on blockchain proposals. The list of attendees at the first meeting included staff from the CFO’s office and community planning and development. The CPD manages billions of dollars in grants to help low- and middle-income people, including developing affordable housing, operating homeless shelters, disaster recovery, relocating domestic violence survivors, building parks, sewerage and community centers. It was the CFO’s office that asked for the meeting, one person told Propublica.
Also listed as a meeting attendee was Judson from EY. For many years, Judson has advocated blockchain, a digital ledger that creates immutable records of transactions stored on multiple computers. Technology boosters cast as a way to reduce intermediaries such as banks and credit card companies from financial transactions and make those transactions more transparent and secure. Judson writes that blockchain helps organizations not siphon money for unintended purposes. “As digital assets such as stable coins and digital currencies become entrenched, more powerful applications will emerge for integrated value exchange,” he writes. Dennis, who served as HUD CFO in the first Trump administration, wrote in a 2021 book that agencies should use technologies such as “blockchain, robotics, and next-generation financial management systems.”
Stablecoins are supported by reserves such as traditional currencies, commodities and Treasury securities. It is supposed to ensure that its value does not fluctuate, unlike Bitcoin, for example. However, on some well-known occasions, the value of stablecoins does just that.
At the HUD meeting, attendees discussed a “proof of concept” project in which CPD begins tracking the funds sent to a single CPD grant recipient and a blockchain subrecipient. The need for the project was “not very clear,” one participant later wrote in a note at the meeting.
Following the meeting, HUD officials wrote and distributed memos from within the agency. “Any implementation that can be imagined in HUD without exaggeration appears dangerous and inefficient,” reads the memo.
HUD has no difficulty tracking grant spending, and the memos fought and eliminated new technology. Incorporating it is time-consuming, complicated and requires extensive training. And if the project involves paying the recipient in cryptocurrency instead of dollars, even if the currency is stable, it injects volatility and unpredictability into the funding flow.
In a subsequent discussion with HUD staff, the author of the memo described the HUD “beach head” and proposal for the introduction of cryptocurrency compared to “Monopoly Money.”
CPD officials continued to raise concerns at follow-up meetings, but the recording was reviewed by Propublica. (Judson did not attend this.) Some participants saw the merits on blockchain ideas, suggesting that they could reduce inaccurate data from grant recipients and allow for real-time spending reporting and monitoring.
“Maybe there are things we can learn from it,” said the person.
One source asked why the agency was considering the project. “It’s sexy,” someone replied. Another mentions Dennis, “IRV asked us to pursue blockchain, so that’s why we’re looking at it.”
Many details were left unexplained at the meeting, including important matters, including whether the proposal involves paying grantees in cryptocurrency. But some have informed that it will do so.
“You can do that with what’s attached to a stable currency. It depends on the Ministry of Finance and I think they’re already going that way. “It’s going to simulate the dollar.”
Another one would be “basically a cryptocurrency linked to a one-to-one US dollar.”
Financial officials suggested that the idea could be applied more widely across HUD. “We’re seeing this across the enterprise. We just wanted to start with CPD,” he said. The agency is also considering the ideas of the Public and Indian Housing Authority for “tenant eligibility and things like that,” he said. The office serves millions of people living in public and federal homes.
This is not the first time the federal government has considered incorporating blockchain into government work. Institutions including the Ministry of Finance, the Ministry of Commerce and even the HUD have been involved in research, prototypes and working groups in recent years. However, those who monitor the crypto industry were not aware of the wider application of technology in the federal government as HUD officials have recently discussed.
Some cryptography experts were suspicious. “This is a terrible idea,” said Corey Frayer, a former Securities and Exchange Commission employee. “It’s absolutely wild to consider this in any way.”
A Flayer, currently in the American Consumer Federation, warned that HUD grants paid through Stablecoin could be reduced to value. He expressed his greatest concern about the notion that the proposal could be extended to other parts of the agency. For example, if it introduces Stablecoin to a $1.3 trillion mortgage insurance provided by the Federal Housing Administration, fluctuations in the value of Stablecoin could have a significant economic impact, he said.
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“Imagine a world where governments are involved in the housing industry, where all the funds circulating in that environment are reduced by 13%,” he said. “It’s hard to imagine it’s not catastrophic.”
Hilary Allen, a law professor at an American University who studies financial regulations and technology, noted that famous attempts to use blockchain for purposes unrelated to cryptocurrency have failed. She is skeptical that the technology will be better in the context of government grants, where bad outcomes can hurt those who rely on HUD funds to survive.
“Blockchain technology has been around for 15 years. No one wants to use it, and now we are trying to force the government to use it,” she said.
Mollie Simon contributed to his research.
