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FinTech in Focus—November 21, 2023

Newsletter
FinTech in Focus—November 21, 2023
Tokenization, Crypto Philanthropy, Executive Order on AI

In This Newsletter

Nicole Valentine at Financial Times Live
Revisiting Crypto Philanthropy
Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence

Nicole Valentine at Financial Times Live

Nicole Valentine participated in the session “Asset Tokenization—From Concept to Reality” at the Financial Times Live Future of Asset Management North America in New York City. The panel also featured Jonathan Steinberg, founder and CEO, WisdomTree Asset Management, Christine Moy, partner and head of digital asset strategy, Apollo Global Management, and Adam Belding, chief technology officer, Calastone, with moderator Dervedia Thomas, managing editor, FundFire.

The panelists discussed the trend of asset tokenization that is seeing renewed interest from regulators, investors, and asset managers. Speakers considered the timeline for widespread trust and adoption of tokenization, the progress made toward developing a regulatory framework that supports a digital asset ecosystem, and the practical use cases available to investors.

According to a recent white paper by Calastone, asset managers are interested in building consensus on how tokenization should be implemented and what the implications will be for fund managers and their customers. Calastone sees tokenized funds as an opportunity to make investment products accessible to a broader group of investors through features like fractionalization while also creating a path to administrative cost savings and fund automation. The paper points to the tokenization of KKR and Hamilton Lane funds as proofs of concept where asset managers have been able to tokenize successfully.

Revisiting Crypto Philanthropy

Crypto philanthropy entered the public consciousness in 2022 at the onset of Russia’s invasion of Ukraine, when donors transferred millions of dollars of digital assets to the Ukrainian government and civil society for humanitarian aid. The key advantage of crypto philanthropy continues to be the speed and agility that the public first saw in Ukraine. As a crisis unfolds in real time, crypto philanthropy can move large sums of capital over borders overnight directly into the wallets of humanitarian organizations on the ground. A new class of Web3 organizations is emerging to help facilitate what was once a chaotic and complex niche in philanthropy.

This October, Robert Heeger, president & CEO of the nonprofit Endaoment, spoke to the Milken Institute FinTech Advisory Council about how crypto philanthropy has evolved. Endaoment is the first onchain 501(c)(3) public charity, established to manage and encourage charitable donations using emerging technologies. Endaoment provides philanthropic services primarily to the blockchain community and introduces nonprofit organizations to the benefits of onchain giving technologies. Donors can give to more than 1.8 million eligible nonprofits across 150+ countries through Endaoment. They can donate using stocks, cash, or crypto from any major brokerage, exchange, or wallet provider, and can choose between contributing to a donor-advised fund, a community fund, or making direct donations to individual nonprofits. The Endaoment protocol protects donor privacy while providing public, verifiable payment receipts for philanthropic activity by using blockchain-based record keeping.

Endaoment has partnered with charitable organizations around the world to provide donations to a range of causes, including the Maui wildfires and reproductive health advocacy. Heeger shared some recent innovations in the crypto philanthropy model. He highlighted projects by Fortune and Time magazine that sold collectible NFTs to raise impact revenue. He also discussed the projects of artistic collectives like Art Blocks, which have set up smart contracts that enable a percentage of the sale of their NFTs to be automatically donated to charities.

Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence

Politico reports that the Biden administration has issued an Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence. Among the order’s provisions, it directs the Consumer Financial Protection Bureau and the Federal Housing Finance Authority to monitor for lending bias caused by algorithmic discrimination. The White House said that the order will work to mitigate irresponsible uses of AI that can lead to and deepen discrimination, bias, and other abuses in justice, health care, and housing.

The executive order is part of an ongoing whole-of-government effort to manage the risks and maximize the benefits of AI technology. The executive order builds on the AI Bill of Rights that the White House released earlier this year and comes after a sustained push on AI policy issues from the Senate. The Senate Banking Committee held a hearing on Artificial Intelligence in Financial Services this September, which featured testimony from Melissa Koide, FinTech Advisory Council member and director and CEO of FinRegLab, about the need for algorithmic transparency and the dangers of perpetuating systemic inequities through biased training data.