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Financial Planning > Charitable Giving > SRI Impact Investing

The Case for Crypto in Impact Investing

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Bitcoin and blockchain go beyond just digital currency, according to Jalak Jobanputra, founding partner of venture capital fund FuturePerfect Ventures. “There’s really interesting cryptographic proof and infrastructure behind what makes bitcoin work,” she said, that could be used to make the financial industry more egalitarian.   

For example, right now it can cost up to 20% of a transaction to send money within Africa. “Imagine if we could open up that mobile money system to the global market and we could reduce friction” to bring the cost of a transaction down to 2% or 3%, she said on a webinar.

(Related: Edward Snowden Talks WannaCry Attack, Blockchain, Financial Regs)

Jobanputra spoke on a webinar on Thursday hosted by Cornerstone Capital Group, a financial services firm dedicated to ESG investing.

There’s “definitely a bubble” forming in cryptocurrencies over the last few months, she said. “We’re seeing new coin offerings on a daily basis. We’re seeing some of them raise $150 million in a matter of 10 minutes [and] none of it’s regulated right now.”

Jobanputra is still bullish on digital currency, but investors have to do their homework. “Any investor just needs to be really careful about the underlying technology and how they are structured so that if there is regulation, you make sure they can still hold value.”

The crypto market today isn’t very user-friendly, she said. “It’s not a seamless experience to gain access to these markets and I definitely think we’ll see that evolve with the consumer-facing part being easier to navigate,” she noted.

There’s a lot happening on the back end, though, that could bring the cost of transactions down and improve privacy. “But that [requires] a lot of companies working on the infrastructure layer and partnering with larger companies,” Jobanputra said.

She called data the “new oil,” and believes that over time, blockchain technology could become a valuable way for consumers to control their data.

“When you have this ledger that is immutable, where nobody can go in and change the transaction once it occurs, then it opens up a whole world of possibilities of how secure we feel sharing our data,” she said.

Wider adoption of blockchain and distributed ledgers could be especially beneficial to the financial services industry by streamlining back-office functions and transaction settlements, and reducing the need for counterparties.

The challenge is that “you need the buy-in of all the participants. The world we’ve lived in, certainly for the last century, has been one where we’re hoarding information and not being open with the data because the data becomes valuable,” she said.

New business models will grow in industries that understand “that inefficient markets are going to become more efficient through this technology, and making people comfortable with this notion of radical transparency,” Jobanputra said.

For example, one company that is successfully using blockchain to track physical assets is Everledger, a digital ledger founded in 2015 that is being used to track diamonds, Jobanputra said.

The Kimberly Process requires diamonds to be tracked from mines to retailers in order to prevent conflict diamonds entering the market. Everledger uses machine learning and computer vision to collect data on each stone and write it into the blockchain, Jobanputra explained.

— Read Turning Cryptocurrency Into an Asset Class on ThinkAdvisor.


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