Binance Exchange's Charity Falling Short of Transparency Goals

The Takeaway:

• The charity arm of Binance was reportedly financed late last year by donations of at least $13 million. A company spokesperson said, "the donated amount does not include the total committed funds."
• Less than half of the donations committed to the Binance Charity Foundation (BCF) are accounted for on BCF's website, which shows under $6 million worth of crypto.
• BCF is partnering with the nonprofit AFRIpads for its Pink Care Token project but is still working to establish ties with actual recipients.
• The nonprofit has a long way to go until it can reach its stated goal of being "100 percent transparent."

Binance’s new Pink Care Token is putting a high-tech twist on the term “period equity.”

Earlier this month the philanthropic arm of the Malta-based exchange, Binance Charity Foundation (BCF), launched a program to give African girls sanitary products to help them stay in school. Helen Hai, head of BCF, told CoinDesk that cryptocurrency donations are bundled into unique tokens, redeemable for menstrual products, then given to the parents and teachers of Ugandan students.

So far, the Pink Care Token website says donations to the campaign have reached roughly 20 bitcoin (nearly $199,000). Donors include Primitive Ventures co-founder Dovey Wan and Arrington XRP Capital founder Michael Arrington. BCF’s goal is to use blockchain technology to offer a transparent connection between donors and recipients. But discrepancies in the nonprofit’s online records raise questions about the way such campaigns are actually managed.

Binance founder Changpeng Zhao reportedly committed to donating $10 million worth of cryptocurrency to launch the nonprofit foundation in 2018, followed by a $3 million donation from Tron founder Justin Sun. In addition, Binance disclosed in October 2018 that token listing fees would now be donated to the charity. Although several $100,000 donations have since been attributed to projects listed on the exchange, only around 507 bitcoin (under $6 million depending on volatility) was actually deposited in the charity wallets.

When asked where the rest of the money is, a BCF spokesperson told CoinDesk:

“The Binance part ($10 million) is a commitment … other [donations] are set aside. But since we don’t have that many projects yet, they will come when needed.”

For example, the spokesperson identified Sun’s donation is part of the Pink Care Token campaign. When asked where that donation was on the public wallet listings, the spokeswoman told CoinDesk to refresh the page in a few minutes. That donation was added just before the interview began.

As such, the foundation may have a long way to go with regards to fulfilling the mission Zhao originally stated of “100 percent transparent” fund management. A BCF spokesperson told CoinDesk the announced donations are committed to projects as they arise.

On the other hand, Hai herself has a checkered past in Africa. She previously worked for Chinese shoe manufacturer Huajian Group, which later came under fire for alleged human rights abuses. Hai told CoinDesk she left the company in 2013 and doesn’t hold any shares or value related to that particular enterprise.

As for BCF, The Block reported the foundation uses 10 percent of funds for operational costs and has deployed over $1 million in capital so far. A BCF spokesperson said these operational costs relate to partner nonprofits, as all BCF operational costs are covered by Binance proper. Hai said the BCF plans to donate to 160 Ugandan schools with 100,000 students, half of which would be involved with the Pink Care Token campaign.

CoinDesk was not able to reach any of the local schools. We will update the article if we hear back.

"There’s definitely room for improvement on our donation process," a BCF spokesperson wrote via email after the initial publication of this article. "We’re working our best to constantly improve our operation while making sure all stakeholders are satisfied with the results. We welcome external supervision and constructive advice."

AFRIpads partnership

BCF is partnering with the local nonprofit AFRIpads to provide the menstrual health products.

AFRIpad communications lead Sarah Sullivan told CoinDesk that beneficiaries will exchange their tokens for the AFRIpads Deluxe kits, containing an annual supply of products. AFRIpads will then redeem tokens for Ugandan shillings using the Binance Uganda exchange.

Contrary to Hai’s estimate, Sullivan said the plan is to start with 50,000 students and that the team on the ground is still in the process of reaching out to the first 50 schools. Sullivan described the token initiative as a “creative way to address the challenges posed by menstrual health in the school setting.”

Stepping back, the Pink Care Token campaign is meant to promote period equity, a term popularized by activist Jennifer Weiss-Wolf to encompass policies that allow people who menstruate to fully participate in society.

According to UNICEF, millions of girls around the world drop out of school when they start menstruating, although affordable sanitary resources could help them continue their education. A lack of access to such necessities in public spaces is often referred to as “period poverty,” a feminist phrase used as part of the marketing for BCF’s campaign.

Weiss-Wolf told CoinDesk AFRIpads is considered an exemplary Ugandan company focused on that issue, creating reusable sanitary pads for people in rural areas.

“AFRIpads received the bid because of its relatively low pricing, sustainability – their product is reusable and environmentally friendly – and their factory in Southern Uganda [that] employs local women of the rural region,” BCF executive director Athena Yu told CoinDesk. “The selection of schools is still ongoing and will be aided by our implementation party, Tech Plus Love Foundation, a non-profit organization registered in Uganda.”

Yet Weiss-Wolf questioned whether cryptocurrency is the right tool for such donations.

“Any sort of intervention program needs to be firmly rooted with local people and what they need, to provide access to the products and resources that would be most comfortable and useful for them,” Weiss-Wolf said.

Grassroots marketing

There are many reasons for Pink Care Token to utilize cryptocurrency, even if a fiat donation to AFRIpads might have accomplished the philanthropic goals.

BCF is partnering with Binance Uganda for this project, a separate entity founded in 2018 to offer crypto trading with fiat on-ramps. Pink Care Token is essentially a digital coupon that requires both product sellers and recipients to set up a crypto wallet or exchange account.

Bitcoin seller Wensi Nuwagaba, based in Uganda’s capital, Kampala, told CoinDesk that rural areas often lack access to banks and large-scale inventory, so mobile payments for smaller merchants are commonplace.

“The biggest challenge we have is internet infrastructure. When you leave the city, the connection is really, really slow,” Nuwagaba said. “What they [BCF] are trying to do is to raise [crypto] awareness as well.”

Cryptocurrency does address some pain points in the Ugandan market.

Nuwagaba said he is part of a WhatsApp group with 206 Ugandan bitcoin sellers who help traders liquidate around $2 million worth of crypto a month. His biggest client liquidated $500,000 worth of bitcoin, but most are freelance traders liquidating roughly $1,000 a month. Some clients also use bitcoin for e-commerce.

“Parts of Africa are excluded from forms of payment. Visa and Mastercard work in Uganda, but remittances for outside Uganda don’t work,” he said. “PayPal doesn’t allow us to receive payments in Uganda. Bitcoin has helped to bridge the gap.”

Within that context, Pink Care Token provides a free learning opportunity for crypto-curious families, even if the BCF lacks complete transparency.

“We hope to use this Pink Care Token project to inspire more people to think about the application of blockchain and crypto in social impact,” Hai said. “Hopefully we can copy the model to more regions where there is a need.”

Update (July 28, 1:51 UTC): This article has been updated to reflect the BCF's future commitment to charity projects, Helen Hai's current business holdings and the current status of Binance Uganda's exchange offerings.

Binance CEO Changpeng Zhao image via CoinDesk archives