UK gov't launches blockchain tech project to track how you spend your benefits

Can virtual currency tech police how those on benefits spend their cash?

The UK government has begun a pilot scheme which tracks how citizens claiming benefits are spending their cash.

As reported by Motherboard, the government launched a trial in June using blockchain technology. This system, which underpins transactions using virtual currency such as Bitcoin, is a kind of digital "ledger" and accountancy system which can never be altered.

This permanent record of transactions and the accounts of benefits claimants is the result of a partnership between GovCoin Systems, the University College London (UCL), Barclays, and energy company RWE npower.

Minister for Welfare Reform at the Department for Work and Pensions Lord Freud announced the trial at the 2016 Payments Innovations Conference in London. According to a press release, Freud said:

"Claimants are using an app on their phones through which they are receiving and spending their benefit payments.

With their consent, their transactions are being recorded on a distributed ledger to support their financial management."

Jeremy Wilson, vice chairman of corporate banking at Barclays, said the trial could result in establishing a "deeper and more effective relationship between the government and claimants", but the idea makes some uneasy.

While our transactions are recorded by banks -- unless we use cash or other methods -- having each transaction recorded by benefits claimants does have an odd ring to it.

You have to wonder why the UK government is spending time and money doing so unless there is an advantage in the long-term.

Hypothetically, such data could be used to establish new rules concerning the use of benefit payments, such as barring luxury expenses or anything not deemed necessary to life. The purchase of luxuries such as alcohol, tobacco, travel, or clothing outside of a specified budget could be imposed, for example, or this scheme could be the first step on a ladder towards a system similar to Australia's -- where a credit card is issued instead of cash which can only be used on necessities such as food, housing, and healthcare.

In January this year, UK chief scientific adviser Mark Walport suggested the use of blockchain technology in the benefits system to "set rules at both the recipient and merchant ends of welfare transactions," which leans itself towards this idea.

Currently, jobseeker benefit claimants can have their cash reduced or removed should they not keep to appointments. Could it be that one day, the purchase of anything not approved by the government will result in the same punishment?

Whether or not you believe the benefits system needs to be shaken up in the United Kingdom, the trial is only in the proof-of-concept stage with a small number of volunteers at present.

However, should it be rolled out nationwide, it may be that the benefits system will undergo massive change in not only how people spend government-issued cash, but what will be allowed -- and what will be penalized.