Meet Fennie — Partnerships and Regulatory Lead
Fennie Wang is the Partnerships and Regulatory Lead of the ixo Foundation where she has been developing relationships with impact investors, Dapps / startups and foundations. She also leads commercial and legal strategy at the foundation.
We speak to Fennie on the state of social impact ICOs and impact investing.
Three (3) Challenges of Social Impact ICOs
During the conversation, Fennie opines on the prospect of a proliferation of social impact ICOs this year. To that hope, she offers her insights and highlights the following three (3) challenges.
1) Social Impact x Blockchain Education
“There is frustration that I’ve heard from folks in the field who are working on true social impact projects — difficulty finding the right investors that understand social impact and blockchain. So there’s a lot of education on both sides of those camps — educating crypto people about social impact, educating impact people about crypto.”
2) Regulatory Uncertainty & Understanding of Tokens as Investment Vehicles
“There’s still trepidation amongst impact investors and equity investors around blockchain and around the regulatory concerns. These more traditional investors do not have the ability to take tokens as their investment vehicle.”
3) Crypto Investing Climate
“And then on the crypto investors’ side, I think there is a little bit of lip service around social impact. At the end of the day, the greed is still there. They’re seeing larger and larger discounts being offered in the market to compensate for the regulatory risks so they expect crazy discounts north of 50%, 80%, 100%.”
“So there’s that kind of flavor happening on the crypto investing side which I think is very unfortunate for the industry and especially for social impact projects where managing sharks is extremely important — you want to build a long-term, high-quality community that is actually working in the social impact and technology space.”
Evidently, the space needs maturing. Further into the conversation, we dive into the regulatory landscape.
Regulatory Advantages of Social Impact ICOs
Would there be any regulatory advantages of social impact ICOs over commercial ICOs? Fennie responds:
“It would be wonderful to have some kind of sandbox but at the same time, it would be really, really disastrous for the impact community if we had some kind of fraudulent social impact ICO that took advantage of relaxed rules around ICOs for social impact projects. For the sake of the long-term viability of social impact projects in the blockchain and crypto space, we should in some ways hold ourselves to higher standards.“
“With social impact bonds — you have structured transactions involving government as outcome payers, and major investment banks and foundations as impact investors. This is above board. There’s an existing framework for this and now we’re just tokenizing that structure and enabling a wider range of investors to participate in that. I think the impact bond is a good candidate for some kind of exemption or sandbox around the securities law regulations.”
Impact Investing Through Social Impact ICOs
It’s undeniable that ICOs in general have made it easy if not possible for retail investors to directly fund the projects they believe in and share in their monetary success. However, in the case of social impact ICOs, crypto investors may not expect the same inflated returns or steep joining discounts compared to commercial ICOs — conscious of the fact that the fundamental ethos of the projects in this space is “not for profit”, “for social good”.
That said, impact investors still need to be assured that their money is going where it needs to go. In fact, they should increasingly demand proof of impact and there are blockchain projects that are already enabling and optimizing this. This is healthy and contributes to the long-term viability of these projects beyond the initial coin offering stage.
This also contributes to the development community as a whole because on a larger scale, it will increase transparency and accountability in the aid system.
Blockchain-Based Impact Investment Models
“With respect to impact investing, the idea is you have private capital that will advance the working capital for a particular project that’s designed to achieve certain outcomes. There’s another party — another funder that’s usually a large foundation or a government that will pay the private investors back a return on capital if pre-agreed outcome metrics are met for that project.” — Fennie Wang
Source: Future Tech Podcast (YouTube) — “Fennie Wang-ixo Foundation- Tokenizing Social Impact on the Blockchain” published on December 22, 2017
For social impact blockchain project owners, the following two (2) “above board” investing models may be worth exploring — given the changing regulatory landscape.
1) Social Impact Bonds (SIBs)
Social impact bonds have been around since 2010 and have enjoyed some success but have yet to really take off as they’re often not quantifiable so it’s hard to measure their success for stakeholders and future investors. Key to SIBs’ breakthrough is demonstrating proof of impact. Several projects are harnessing the blockchain’s immutability and efficiency not only to provide proof of impact but also possibly create a new asset class of proof of impact. One of these is ixo.
2) Tokenized Exchange Traded Funds (ETFs)
Just like any other token, impact tokens can be sold or traded on secondary exchanges. They can be used to fund other social impact projects within the token’s ecosystem, within the wider impact economy among cooperating projects and exchanged within the token economy. SIBs themselves can also be tokenized. The tokenization of impact paves the way for fund managers to include impact crypto assets such as SIBs and carbon tokens amongst more traditional assets in their portfolio.
As more sophisticated impact investing models come to the fore through deeper understanding of blockchain’s capabilities, investors may soon come to expect higher returns on their impact investments — a positive for impact investing as this raises confidence among investors and encourages more investment.
Blockchain For Social Impact Communities
According to Cecilia Chapiro of UNICEF Innovation, Emerging Technologies:
“The way we believe progress can happen is by investing in many different early stage startups and combining them altogether in different clusters that can feed on top of each other. When you think about one startup building a blockchain technology for smart contracts, they can achieve x much in y amount of time but if you think about investing in different startups working on smart contracts through blockchain, they can achieve much more if their technologies feed on top of each other. So the way we think about progress and humanitarian relief is we’re now investing in these early-stage prototypes and we hope that in 5, 10 years from now, all these prototypes will become solutions that can address the problems that we’re facing today.” — Cecilia Chapiro
Source: Blockchain for Social Impact Coalition BSIC (YouTube) — “Investing in Blockchain for Social Impact” published on December 7, 2017
Social impact blockchain project owners should take advantage of the synergistic energy of communities such as the Blockchain for Social Impact Coalition or UNICEF Innovation among others.