As part of a new proof-of-concept trial in cooperation with Barclays, RWE npower and University College London, the UK Department for Work and Pensions (DWP) has partnered with GovCoin Systems to look into developing a blockchain system for welfare payments.

The blockchain system, best known as the system behind bitcoin, is a secure transaction ledger database that functions by establishing a distributed network of computers. With the help of complex algorithms, every individual transaction made is recorded, eliminating the need for third parties such as Paypal and possibly explaining London’s interest in the technology.

GovCoin claims that a total of one trillion US dollars is lost annually “due to friction and fraud costs in the distribution of social welfare and aid.” In an era of perpetual budgetary woes, not to mention the economic insecurity in the wake of the Brexit referendum, any technology which promises to recover such an amount of funds would likely be irresistible to the DWP.

Commenting on the trial, Barclays Corporate Banking vice chairman Jeremy Wilson mentioned the additional layer of secure, tamper-resistant data and identity enabled by blockchain technology, emphasizing the potential for a more effective exchange between welfare claimants and the government, and voicing his enthusiasm as to how the service develops in the future.

Back in January, the UK Government Office for Science called for the technology to be experimented with, going on to highlight potential security needs. While GovCoin has said that University College London does not expect to finish compiling the final results of initial trials until October, these security concerns have produced controversy among privacy activists.

At the Payments Innovation Conference in early July, Lord Freud, the DWP’s minister for welfare reform, explained the app as follows: “Claimants are using an app on their phones through which they are receiving and spending their benefit payments.” He added that with the participants’ consent, transactions were being recorded on a distributed ledger to “support their financial management.”

From the perspective of those concerned for welfare applicants’ privacy, this will likely seem like a euphemism for tracking purchasing habits – which is exactly what the government seems intent on doing. According to Joseph Lorenzo Hall, chief technologist for the Center for Democracy & Technology, the problem with this approach is that blockchain technology is by definition public and impossible to delete from the record.

This means that spending habits would be immortalized in government records. Further, Hall noted that encrypting sensitive information on the blockchain is a bad idea, as “we expect to break or find flaws in the underlying crypto in coming years.”

The UK’s Open Data Institute (ODI) has also expressed concerns, with Technical Director Jeni Tennison noting that the system would have to be managed very carefully in order to avoid claimants’ personal information being exposed to large groups of people. In essence, privacy and anti-poverty activists fear that the government could use the complex technology behind the blockchain to mask behavior that would otherwise be viewed as intrusive and characteristic of an authoritarian “big brother” state.

A DWP spokesman disavowed any such intentions on the part of the government, insisting that “there are no plans to replace any DWP payment systems” and that distributed ledger technology “does not place any restrictions or limits on what a claimant can spend their welfare payments on, nor tracks how they spend them.” Nevertheless, critics of the DWP’s plans will likely remain unconvinced.