By Lulu Yilun Chen for Bloomberg
Chinese billionaire Jack Ma wants to pry the lid off China’s opaque charities. Ant Financial, the affiliate of Alibaba Group Holding Ltd. he controls, is using the technology behind bitcoin to record transactions and improve the accountability of the country’s philanthropic organizations.
The company began a tamper-proof ledger based on blockchain technology to record donations made by its more than 400 million users of Alipay, the online payments and investment service. Donors on its “Ant Love” charity platform will be able to track transaction histories and gain a clearer understanding of where their funds go and how they’re used, Chief Technology Officer Cheng Li said. That makes it tougher to alter records, and may help restore some of the trust that’s been squandered over the years.
Chinese philanthropy rose 10-fold to $15 billion in the decade through 2014, accordingto the Xinhua News Agency. But the sector’s been plagued by scandals and mismanagement. In one high-profile instance, the country’s anti-corruption watchdog investigated irregularities in the parent of Project Hope, the South China Morning Postreported. The Red Cross Society of China came under scrutiny after a woman who claimed affiliation with the agency posted photos of her lavish lifestyle in 2011. The charity has since denied she held any staff positions.
That’s where Ant, known formally as Zhejiang Ant Small & Micro Financial Services Group, comes in, Cheng said. The project kicks off via a tie-up with the China Social Assistance Foundation, as a number of larger charities consider clambering aboard. The company calls the initiative a milestone for Ant Love, which has connected users with more than 1,000 charitable organizations and helped with donations of over 600 million yuan as of the end of last year.
“We hope to bring more transparency to charity and blockchain technology’s decentralized nature fits that purpose well,” Cheng said by phone. “It means that all the information and transaction history of funds will be more reliable and can’t be easily tampered with.”
Its involvement with charities may be just the first step. Ant Financial joins companies including Citigroup Inc. and JPMorgan Chase & Co. now experimenting with blockchain. Financial institutions are studying how to set up so-called smart contracts that automatically respond to events. The ledgers can also shore up security by preventing hackers from taking over individual computers to gain access to a network. Beyond charity, Ant Financial is studying other applications for decentralized ledgers.
The World Economic Forum has identified blockchain technology as one of the six computing “mega-trends” that will shape the world in the next decade. It estimated assets worth 10 percent of global gross domestic product could be stored on blockchains by 2027.
“Ant Financial is smart to start experimenting with blockchain technology with something like charity, which is less sensitive and risky,” said Ma Haobo, the Beijing-based founder of Hoopox, a startup using blockchain to securitize intellectual property. “If it’s really ambitious, the company should start looking at how to apply the technology in other financial areas.”
For its initial project, Ant Financial is using a private blockchain, which currently only it has access to. The company plans to open up the ledger to charity organizations and auditors in the future, Cheng said.
“It’s great that Ant Financial is using blockchain technology to bring transparency to a murky industry that has operated like a blackbox,” said Chandler Guo, an investor in digital currency startups. “The key challenge is whether they have the right talent and execution strategy.”
First appeared at Bloomberg