U.S. Housing Agency Explores Bold Crypto Experiment

The U.S. Department of Housing and Urban Development (HUD) is reviewing the potential use of cryptocurrency in its operations, a move viewed by some as a precursor to broader implementation across federal agencies. This information comes from a recording of a recent meeting and insights from three officials familiar with the discussions.

Concerns have been raised within HUD regarding the idea of issuing major federal grants in cryptocurrency, primarily due to its volatile nature and links to financial speculation and crime. Discussions have so far centered on utilizing blockchain technology to enhance the oversight of HUD grants. Proponents claim blockchain may offer transparency, but critics argue its primary association is with crypto transactions.

A HUD staff member expressed skepticism, suggesting that this approach could introduce an unregulated financial element to the housing market, reminiscent of the subprime mortgage crisis of 2008. The idea of employing a stablecoin—designed to mitigate value swings—was also considered, though historical fluctuations remain a concern.

The initiative appears to be championed by Irving Dennis, HUD’s principal deputy chief financial officer and a former partner at EY (formerly Ernst & Young). Reports indicate that EY executives have engaged with HUD to discuss such proposals.

Former President Donald Trump’s administration has previously leaned toward pro-crypto policies, further complicating the environment around this initiative. The White House’s anticipated “crypto summit” indicates a sustained interest in expanding the industry’s influence within government operations.

Both Dennis and HUD spokesperson Kasey Lovett have publicly denied plans for blockchain or stablecoin implementation, with Lovett asserting, “Education is not implementation.” However, confirmations exist regarding meetings that have taken place with attendees from various HUD offices, including those managing billions in grant funding aimed at supporting low-income communities.

During these meetings, participants discussed a “proof of concept” that would involve tracking grant funding through blockchain for select recipients. Yet, many attendees felt the rationale behind needing this technology was poorly articulated. Following the discussions, a memo circulating among HUD officials criticized the blockchain concept, labeling its introduction as potentially dangerous and unnecessary given the agency’s existing capabilities for tracking funding.

Despite objections, not all voices within HUD have dismissed the idea. In later discussions, some attendees acknowledged the possibility that blockchain could reduce inaccuracies in grant reporting. One official remarked, “Maybe there is something that we could learn from it,” suggesting a cautious exploration of the technology’s merits.

While details about potential cryptocurrency payments remain unclear, certain discussions suggested that stablecoin payments could be tied directly to the U.S. dollar. One finance official hinted at broader applications for blockchain across the agency, including for tenant eligibility evaluations within public housing.

Historically, federal agencies have explored blockchain technology, including efforts by the Treasury and Commerce Departments. However, the scale of the blockchain discussions at HUD is unprecedented, raising eyebrows among crypto analysts. Critics within the industry have called the proposal ill-conceived, cautioning that volatility linked to stablecoins could jeopardize the stability of government-funded housing projects.

Experts like Corey Frayer from the Consumer Federation of America have voiced particular concern over the possible integration of stablecoin into the housing insurance framework administered by the Federal Housing Administration, warning that devaluation could lead to catastrophic scenarios. Similarly, law professor Hilary Allen expressed skepticism about the blockchain’s efficacy in government applications, pointing out that past attempts to utilize this technology have often ended in failure.

In summary, while HUD is in the early stages of exploring the intersection of blockchain technology and federal funding, significant skepticism from within the agency and the wider regulatory community raises serious questions about the viability and safety of such an approach.