Cryptocurrency, a digital or virtual form of currency that uses cryptography for security, has been making waves in various sectors, including philanthropy. The use of cryptocurrencies in charitable giving has significantly grown in recent years, opening up new possibilities for global giving, efficiency, and transparency.
Cryptocurrencies, such as Bitcoin and Ethereum, provide quick cross-border transactions, transparency, and lower administrative costs, benefiting both contributors and nonprofits. This has led to the rise of crypto-philanthropy, where donors contribute to charitable causes using digital currencies.
According to a study by Fidelity Charitable, 45% of cryptocurrency investors donated $1,000 or more to charity in 2020, compared to 33% of the full investor population. This indicates that cryptocurrency owners are a disproportionately more charitable group.
Crypto donations are a relatively new form of non-cash asset giving. Similar to gifts of appreciated stock, which many nonprofits already accept, crypto donations offer donors a tax-efficient way to support their favorite charitable causes.
Because of the way crypto donations are treated by the IRS, donors may be able to give 20% more to their favorite causes by directly donating crypto instead of selling crypto first, then donating the cash proceeds. This means that by not accepting crypto donations, your nonprofit may be leaving significant donation revenue on the table.
While the benefits are clear, there are potential pitfalls to be aware of when dealing with cryptocurrency donations. One of the main concerns is the volatility of cryptocurrencies. The value of cryptocurrencies can fluctuate wildly, which can impact the value of the donation.
Another concern is the regulatory environment surrounding cryptocurrencies. The rules and regulations around cryptocurrencies are still evolving, and nonprofits need to ensure they are compliant with all relevant laws and regulations when accepting crypto donations.