Chinese billionaire Jack Ma hopes blockchain can change the opaque status of China's charity industry

Ant Financial, an affiliate of Alibaba Group Holding Ltd., is using the technology behind Bitcoin to record transactions and improve accountability for charities.

The company began using a tamper-proof ledger based on blockchain technology to record donations to Alipay, an online payment and investment service with more than 400 million users. Technical director Li Cheng said donors on the Ant Love charity platform will be able to track transaction history and have a clearer understanding of where their funds have been and how they have been used. This makes the records difficult to modify and may help to address the lack of trust that has existed for many years.

China's philanthropy has risen tenfold in a decade, reaching $15 billion in 2014, according to Xinhua. But the industry has been plagued by gossip and mismanagement. In a high-profile case, the country's anti-corruption watchdog investigated irregularities at the parent company of Project Hope, the South China Morning Post reported. China's Red Cross has been in the spotlight since 2011, when a woman claiming to be with the organization posted photos of her lavish lifestyle. The charity has denied she was a Red Cross worker.

That’s where Zhejiang Ant Small and Micro Financial Services Group Co. Ltd. came in, Li Cheng said. The project kicked off by forming an alliance with the China Social Relief Foundation as a candidate for cooperation with many large charities. The company calls the program Ant Love Milestone, which has connected users with more than a thousand charitable organizations, with donations exceeding 600 million yuan by the end of last year.

“We hope that philanthropy can be more transparent, and the decentralized nature of blockchain is a good fit for this purpose,” Li Cheng said by phone. “This means that all information and transaction records of funds will be more reliable and not easily tampered with.”

Its involvement with charities may be just the first step. Ant Financial joins companies including Citigroup and JPMorgan Chase & Co. in experimenting with blockchain. Financial institutions are looking at how to build so-called smart contracts that can automatically react to events. Ledgers can also provide security by preventing hackers from gaining access to a network by taking control of a PC. In addition to philanthropy, Ant Financial is also looking at other applications for decentralized ledgers.

The World Economic Forum has identified blockchain technology as one of the six computing “megatrends” that will have a huge impact on the world in the next decade. It is estimated that by 2027, 10% of gross domestic product (GDP) may be stored on the blockchain.

“It’s very smart for Ant Financial to start experimenting with blockchain technology in philanthropy,” said Ma Haobo, founder of Beijing-based Hoopox, a startup that uses blockchain to securitize intellectual property. “If it’s really ambitious, the company should start thinking about how to apply the technology to other financial sectors.”

Ant Financial’s initial project uses a private blockchain that only it has access to for now, but Li said the company plans to open the ledger to charities and auditors in the future.

“It’s great that Ant Financial is using blockchain technology to bring transparency to a sluggish industry,” said Chandler Guo, an investor in digital currency startups. “The key challenge is whether they have the right talent and execution strategy.”