By Sarah Holder
A new basic income pilot will pay low-income New Yorkers $12,000 in cryptocurrency to help them invest in big expenses like education and housing.
When Luis Acero was in his early 20s, he lost a few thousand dollars on cryptocurrency bets gone wrong. “I didn’t know what the hell I was doing,” he recalled.
Acero, now 25, is more focused on investing in his future as he finishes college. So when a friend told Acero about a new initiative to give young, low-income New Yorkers $12,000 over the next five months, he had his reservations. That’s because the money would be distributed in a cryptocurrency called USDC.
Acero decided the opportunity was too good to pass up, and applied for the program. Now, he’s one of 160 New Yorkers between the ages of 18 and 30 picked by lottery to participate; they received the first deposit into their Coinbase account last week.
The program is the latest to study how well no-strings-attached support works to alleviate poverty and improve quality of life. But it’s the first in the US to give out that money in cryptocurrency.
GiveDirectly, one of the largest and longest-running nonprofits dedicated to sending money directly to those in need, will administer the program. The funding comes from the cryptocurrency platform Coinbase, which sees the initiative as a way to “provide financial support and crypto education for young New Yorkers and showcase how blockchain-based payments can have a positive impact,” said Darin Carter, who runs US Policy and Grassroots Advocacy for Coinbase.
Coinbase is part of a broader legacy of technology companies that donate cryptocurrency in the hopes of advancing their vision of a digital economy. By their own admission, it hasn’t always worked. In 2023, Coinbase abandoned its own crypto donation effort, GiveCrypto, saying it was “unable to create lasting change,” and that it would give some of its remaining funds to GiveDirectly, which was better-equipped to distribute them. Those funds totalled about $2.6 million, and went directly towards seeding the New York City program.
Before GiveCrypto shut down, Fortune’s Leo Schwartz revealed issues with its strategy of using local “ambassadors” to distribute funds around the world, writing that the program represented the “dark side of crypto-based charity — a mess of illogical coordination, misplaced assurances, and unpaid labor.” Coinbase says they’re now focused on new philanthropic strategies like the GiveDirectly collaboration.
Emma Kelsey, who leads US programs at GiveDirectly, says one of the NYC program’s aims is to better understand the benefits and drawbacks of giving in crypto, along with whether the free money affects recipients’ decision-making and changes their housing and educational options.
The program, dubbed “Future First,” is launching at a critical moment for the guaranteed income movement, which has been testing the theory that distributing money directly to people in need without dictating how it’s spent is a more efficient and effective way to fight poverty. Recent study results on other programs have had mixed results, with some finding null effects on factors like mental, physical, and financial well-being, and others showing significant benefits such as lower preterm birthrates and food insecurity.
The GiveDirectly-Coinbase collaboration promises to test something new. Instead of meting out recurring payments over a long period of time, the NYC pilot is giving participants one large $8,000 lump sum, along with five smaller deposits of $800. GiveDirectly believes that doling out most of the money at once should make it easier for recipients to make substantial upfront investments in education or housing, says Kelsey. “You could imagine a lump sum being used for a security deposit, for example,” she said.
The nonprofit used a similar approach for its basic income experiment in Kenya, which started in 2018. There, people who received a bigger chunk of cash upfront were more likely to start businesses and reported more income growth than people who got around the same amount over two years. “We have a hypothesis that for this age group, that lump sum model also makes a lot of sense, just given this pivotal life stage,” Kelsey said.
But unlike that program, this one will be giving that lump sum in crypto, which adds a layer of complexity to a giving initiative that’s described as no-strings-attached.
“If this is being funded in crypto there are some strings attached,” said Hilary Allen, a professor of law at American University’s Washington College of Law, who focuses on financial regulation and new technologies.
One difference between $12,000 in cash versus crypto is how its value can change over time. While digital currencies like Bitcoin are famously volatile, USDC promises more stability than other assets because it’s pegged to the value of the US dollar and backed by cash or cash equivalents, like US treasuries.
Still, “stablecoins” like USDC don’t always live up to their name, says Allen, as serious market shocks can cause coins to lose their peg and become worth less than a dollar. Thus far, holders of USDC have been protected even in the fallout from the major market shock of Silicon Valley Bank’s collapse. Circle, the company that issues USDC, didn’t respond to a request for comment.
There’s also the question of how easily recipients will be able to spend the funds. Stablecoin use is not exactly ubiquitous: While some retail stores like Home Depot and Chipotle take USDC through certain platforms, they’re not a common method of paying rent, for example, or tuition.
Coinbase argues that new legislation is lending more credibility to the stablecoin market, and that soon it will help bring the digital assets into the mainstream. In July, President Donald Trump signed the “Genius Act,” which introduced more regulation and reporting requirements for stablecoin issuers.
In the meantime, recipients have a few options: They can transfer the funds into a traditional bank account from their Coinbase wallet. (Instant transfers come with a 1.75% fee back to Coinbase.) They can also use a Coinbase debit card at stores or withdraw funds as cash from any ATM. And then there’s the lowest-friction option of keeping the money in their Coinbase account. There, recipients can let the USDC accrue the Coinbase equivalent of interest – set at 4.1% – or reinvest it into other cryptocurrencies within the Coinbase platform. Allen says that could encourage recipients to engage in risky speculation.
“Stablecoins are less volatile than Bitcoin, but I would say that giving money in this way is very much designed to make it easier to take that money to bet on Bitcoin,” said Allen. “Because it’s going to be sitting as crypto in a crypto wallet with a crypto exchange.”
During an onboarding session for the participants, Kelsey said the nonprofit covered the potential downsides of investing in other cryptocurrencies. They “emphasized volatility, the possibility of losing your funds,” she said. “We are not encouraging individuals to invest in risky assets.” She added that one of the major benefits of using USDC is how fast GiveDirectly can transfer funds, and how cheaply: It only cost the nonprofit 26 cents to issue the first batch of $800 payments — significantly less than it would have to issue prepaid debit cards.
When the program is over, they’ll survey recipients about their experiences with Coinbase as compared to traditional banking services, and assess whether crypto added unnecessary barriers or offered a welcome alternative for low-income residents who are more likely to be unbanked, underbanked, or distrustful of financial institutions.
For Acero, the 25-year-old student, concerns about crypto didn’t outweigh the potential the money could unlock. “It will give me a lot of emotional, psychological tranquility,” he said. “The money will certainly get me on my feet.”
Acero says he plans to transfer much of the money into a personal bank account, and use it to pay off debt, cover some expenses, and start saving. But he’ll also keep some in his crypto wallet. Acero says the guidance provided by GiveDirectly made him feel more comfortable with the prospect of handling digital currencies this time around. He’s ready to “try investing the right way,” he said. “Not like the past.”
This post was originally published on Basic Income Today.