This story is over 5 years old.

The UK Wants to Police Welfare Recipients’ Spending With the Blockchain

Privacy and anti-poverty activists are up in arms.
July 13, 2016, 6:05pm
Image: Shutterstock

The UK government is tracking the spending of people who receive welfare by posting their purchases to a digital ledger that can never be altered—specifically, a blockchain, the technology underpinning virtual currencies like bitcoin.

The use of such technology to police how the poor spend their money has come under fire from privacy advocates and anti-poverty activists alike.

The trial, which began in June, is the result of a partnership between UK company GovCoin Systems, University College London, Barclays, and energy company RWE npower. The trial was announced by former banker and current Conservative Minister of Welfare Reform David Freud at the 2016 Payments Innovations Conference in London.


"Claimants are using an app on their phones through which they are receiving and spending their benefit payments," Freud said, according to a press statement. "With their consent, their transactions are being recorded on a distributed ledger to support their financial management."

But blockchain technology, by virtue of posting personal information permanently, risks exposing highly personal information, according to the UK-based Open Data Institute (ODI).

"It seems awfully punitive"

"Blockchain-based benefits need to be carefully designed to meet agreed policy and ensure that recording auditable benefits payments and how the benefit recipient spends that money doesn't unintentionally, even some time in the future, expose personal information to a wide group of people," Jeni Tennison, Technical Director of the ODI, wrote me in an email.

Even if the personal information stored on the blockchain were encrypted, Tennison continued, "over a sufficiently long period, any encryption will be broken whether by discovery of loopholes, backdoors, or the advent of new techniques such as quantum computing."

But even if some of the dire privacy implications of the trial could be smoothed over, welfare experts believe that such a technological solution to a social problem like poverty is wrong-headed in the first place.

"People have the right, and the responsibility, to make their own financial decisions," said Evelyn Forget, a professor at the University of Manitoba currently studying the effects of a basic income at Massey College in Toronto. "The idea of this kind of expenditure data being tracked and monitored raises the possibility that it could in principle be used to justify reduced levels of support."


"It seems awfully punitive," she continued.

Technocratically-administered punitive measures against the poor are exactly what UK Chief Scientific Adviser Mark Walport suggested in a report from January of 2016 that recommended the use of blockchain technology in the welfare system. In it, Walport stated that with the blockchain and mobile payments, it would be possible "to set rules at both the recipient and merchant ends of welfare transactions." In other words, to control how the poor spend their government money.

"The proof of concept, which will ultimately comprise only 24 users, uses a private permissioned distributed ledger to allow users to store their transactions," a GovCoin Systems spokesperson wrote in an email, emphasizing that the tool is for welfare recipients to manage their own finances. "GovCoin is cognizant of privacy concerns. Under the solution being trialled, consumers have complete control over how their data is used, and the government does not receive or see consumers' data."

GovCoin is cognizant of privacy concerns. Under the solution being trialled, consumers have complete control over how their data is used, and the government does not receive or see consumers' data."

Blockchain technology is often positioned as a value-neutral mechanism for handling everything from land claims to the stock market, since it is publicly viewable, indestructible by virtue of existing on a network of computers instead of a central server, and unalterable.

But, as privacy and anti-poverty experts have pointed out, in the case of tracking the poor, blockchain technology is anything but value-neutral and actually assumes a whole bunch about poor people and how they should be handled by the government.

Namely, that the poor shouldn't be left to make their own decisions about how to spend their money responsibly, and that a piece of distributed code should be employed to organize their financial lives.

I wonder, would Minister of Welfare Reform David Freud appreciate having all of his purchases tracked and published to a ledger?

Should the poor? UPDATE: This article has been updated with comment from GovCoin Systems.