Mykyta Cherviakov is a PhD Student at the Department of Civil Law, Yaroslav Mudryi National Law University, and a Lead Specialist at the Department of Legal Acts Registration and Systematization, Ministry of Justice of Ukraine. Mykyta is also a Participant of the Mentorship Program for Early Career Researchers on Business and Human Rights in Ukraine, implemented by the Raoul Wallenberg Institute of Human Rights and Humanitarian Law (Sweden) in partnership with Yaroslav Mudryi National Law University, and funded by the Swedish Institute.
Introduction
Businesses are actively integrating blockchain initiatives into their operations, using digital currencies as tools for financial inclusion, transparency, and attracting investments. However, the use of digital currencies in entrepreneurial activities brings both opportunities and risks to human rights. In this blog, the implications of using digital currencies for upholding and violating human rights will be analyzed, along with existing examples of their application.
Opportunities of Digital Currencies for Human Rights Compliance
Principle 15 of the UN Guiding Principles on Business and Human Rights (hereafter referred to as the Guiding Principles) outlines the general obligations of companies to develop, implement, and maintain policies that ensure respect for human rights in all aspects of their activities. According to this principle, companies must take measures not only to prevent human rights violations but also to actively promote their protection. Funding socially responsible projects with digital currencies aligns with these obligations, as the transparency and speed of fundraising facilitated by blockchain technology enable companies to demonstrate their accountability and commitment to supporting human rights.
For example, Binance Charity, the philanthropic arm of Binance, ensures absolute transparency in the use of funds by accepting cryptocurrency donations. This demonstrates that the company acts in the public interest, supporting humanitarian initiatives and educational programs. Thus, the use of cryptocurrencies as a funding tool becomes an important practical mechanism for companies to showcase their dedication to human rights principles.
The use of digital currencies can significantly facilitate the implementation of human rights due diligence in supply chains, especially when a company interacts with a large number of entities. Some blockchain companies optimize supply chains using smart contracts, which allow payments to be made automatically only after confirming that the products meet established quality, environmental, and ethical standards. This enhances the transparency of processes, ensuring reliability and accountability at every stage of the supply chain.
For example, VeChain uses its digital currency VET to automate processes in supply chains, playing a key role as a means of exchange and value storage within the VeChainThor ecosystem. Through smart contracts, the platform automates processes such as confirming the receipt of goods or fulfilling contract terms. To ensure that products comply with environmental and ethical standards, VeChain integrates external data, such as certificates or audit reports, through oracles or other mechanisms that connect the blockchain to the real world. This improves transparency and efficiency in supply chain management, although the accuracy of these processes depends on the reliability of the input data.
It is important to emphasize that companies like VeChain operate not only as developers of technological solutions but also as independent entities subject to regulatory requirements in the fields of business and human rights. Despite their contributions to creating tools for adhering to ESG criteria and human rights standards, these technologies are not without risks.
Blockchain relies on the accuracy of input data, meaning falsified certificates or reports can go unnoticed, potentially leading to violations of standards such as prohibiting child labor. The high cost of implementation may limit access for small suppliers, particularly those from developing countries, creating inequalities. Smart contracts automatically execute predefined conditions but do not account for humanitarian aspects, which can lead to unjust decisions in force majeure situations. Additionally, centralized platform management poses risks of data monopolization or decision-making that ignores ethical standards, while cyberattacks can compromise the integrity of the system. Finally, even energy-efficient solutions like Proof of Authority (PoA) require significant resources to maintain the blockchain infrastructure, which may conflict with environmental goals.
Risks of Digital Currencies in Business and Human Rights
The unique characteristics of digital currencies also include specific risks in the business and human rights domain. The anonymity and decentralized nature of cryptocurrency transactions complicate the tracking of illicit financial flows, potentially facilitating the funding of criminal activities, including human rights violations. In 2020, it was revealed that criminal groups used cryptocurrency exchanges with weak anti-money laundering (AML) procedures to launder funds obtained from human trafficking and sexual exploitation. According to Chainalysis’s «The 2024 Geography of Crypto Report», a significant portion of illicit funds was transferred through cryptocurrency platforms, making it difficult to trace and hold perpetrators accountable.
In line with the Guiding Principles, companies must respect human rights and prevent violations. Non-compliance with anti-money laundering laws and laws against human trafficking has led to the financing of activities that infringe on human rights.
The primary issue in using digital currencies, including in business operations, remains the lack of comprehensive international standards and clear national legal frameworks that cover all aspects of digital currency circulation, consumer rights protection, taxation, and more. As of late 2024, initiatives such as the FATF Recommendations on Virtual Assets and the EU Markets in Crypto-Assets Regulation (MiCA) partially address these issues but mostly focus on financial transparency and preventing money laundering.
At the same time, in accordance with Principle 3 of the UN Guiding Principles in meeting their duty to protect, States should: (a) Enforce laws that are aimed at, or have the effect of, requiring business enterprises to respect human rights, and periodically to assess the adequacy of such laws and address any gaps; (b) Ensure that other laws and policies governing the creation and ongoing operation of business enterprises, such as corporate law, do not constrain but enable business respect for human rights; (c) Provide effective guidance to business enterprises on how to respect human rights throughout their operations; (d) Encourage, and where appropriate require, business enterprises to communicate how they address their human rights impacts. This should urge states to create legal mechanisms that safeguard consumers and prevent potential human rights violations in the field of digital financial services.
Paying Wages in Digital Currencies: A New Frontier
Paying wages in digital currencies, such as cryptocurrencies, is becoming an increasingly relevant topic in the business and human rights field. This phenomenon combines technological innovation with legal and ethical aspects. On one hand, it offers advantages like fast and transparent transactions, global access, and the elimination of currency barriers. On the other hand, issues such as legal uncertainty, fraud, volatility, and taxation remain problematic.
Despite the risks, in August 2024, the Dubai Court of First Instance set an important precedent (case decision № 1739/2024) by recognizing salary payments in cryptocurrency as legal. The case involved an employee who filed a lawsuit over the non-payment of part of their salary in tokens as stipulated in their employment contract. The court ordered the employer to pay the arrears specifically in cryptocurrency, without converting it into fiat currency, emphasizing that the payment method does not affect the worker’s right to receive compensation for their labor.
The Guiding Principles encompass workers’ rights, including fair compensation. Article 1 of the Protection of Wages Convention № 95 defines “wages” as remuneration calculated in money, established by agreement or legislation, which the employer is obligated to pay the worker for work performed or to be performed under a contract. If the employer specifies a clearly defined monetary value and payment method in accordance with the national law, the wages will comply with human rights standards.
Furthermore, companies planning or already paying wages in digital currencies must conduct human rights impact assessments, respect equality principles, and ensure transparency. Collaboration between the public and private sectors and the involvement of stakeholders are crucial for creating a regulatory framework, policies, and practices to prevent adverse human rights outcomes.
Conclusion
Digital currencies are a powerful financial tool, akin to an open book: responsible businesses can use them to transparently and effectively uphold human rights, ensuring accountability and trust in their operations. However, in the wrong hands, this tool becomes a shadowy zone hiding violations and abuses. Digital currencies are not inherently a cause of human rights violations but can become a means for either supporting or undermining human values, depending on how and by whom they are applied. A responsible approach, aligned with the Guiding Principles, is key to realizing their potential as a tool that enhances ethics and transparency.
The author is deeply grateful to Anil Yilmaz Vastardis for her continuous support in developing this blog.
Suggested citation: M. Cherviakov ‘Ethical Choices In Business: How Digital Currencies Can Support Or Threaten Human Rights?‘, Nova Centre on Business, Human Rights and the Environment Blog, 17 March 2025