The Heart Is There, But Infrastructure Is Lacking For Crypto Giving

We surveyed nonprofit fundraising professionals about their views on accepting donations in cryptocurrencies.

Here are a few of the typical responses we received:

"I'm completely unfamiliar with what crypto is, who has it and why... what do I need to know so I'm not left behind on a trend?"

"I need the crypto primer. I keep reading about it but I still don't really understand it."

"Where do I start?"

Those are all reasonable responses. Our survey revealed general public confusion around a new asset, skepticism around the underlying technology and wariness about price volatility.

Charitable organizations would be at a serious disadvantage if they decided to ignore crypto altogether. With an affluent, generous and young user base, this is an important demographic to cultivate, and the opportunity to tap into crypto generosity continues to grow.

Unfortunately, most nonprofits have not been properly set up for success in unlocking this form of generosity due to internal and external hurdles. Specifically, there are a number of potential pitfalls specific to nonprofit organizations in thinking about non-cash assets in general and crypto in particular:

• How to value them
• How to receive and process the donations
• How to deal with uncertain regulatory and tax requirements
• How to accept new kinds of gifts (update gift acceptance policy, board approval requirements)

Meanwhile, all these concerns exist alongside increasingly philanthropic crypto holders and the projects they are driving.

• There's Ethereum co-founder Vitalik Buterin's donation of more than $1 billion in different crypto coins to COVID and other healthcare research.
• There are tens of millions raised on-chain this year to support Ukraine.
• There's the $50 Million+ donated in 2021 alone by generative artists creating code-based, algorithmic pieces who released their work on the Art Blocks platform.
• And there are thousands upon thousands of other donors with wallets of all sizes looking to put their crypto gains toward worthwhile purposes.

These and other philanthropic projects thus present a market opportunity. There are many crypto holders eager to donate their crypto assets, but very few nonprofits are in a position to accept such gifts. Many organizations may be unaware, but, thankfully, an industry built on innovation is starting to make tools available to empower them to benefit from crypto philanthropy at little to no cost.

Crypto for Charity, for example, provides an infrastructure by which a holder of crypto assets can make a gift in support of a qualified 501(c)(3) public charity without any need for the recipient organization to first learn how to receive, hold, process, document or otherwise deal with donated cryptocurrency.

At the end of the day, the donor's favorite charity now simply needs to meet IRS eligibility requirements and be set up to receive a USD transfer (a mailed check or ACH transfer).

Why Donate in Crypto?

All this invites an obvious question: Why wouldn't crypto holders not just donate in cash directly and make it all easier? We hear three main reasons:

1. Direct crypto donations are tax-advantaged - For U.S. taxpayers who've made money on crypto (and the organizations they support), this is a big one. If a crypto asset has been held for longer than 12 months and increased in value, donating the asset itself — rather than the cash proceeds from its sale — will not trigger any capital gains tax on the appreciation. Thus, the donor can generally claim a deduction for the full fair market value of the asset, and the recipient nonprofit will receive the full, untaxed value of the crypto. This makes it clearly beneficial from a tax standpoint vs. donating the cash proceeds of the sold asset or donating other cash.
2. Cost-effectiveness -At least with Crypto for Charity, which charges no transaction or processing fees, more of the donated value will wind up reaching its charitable destination compared to online donations made via credit card, which typically impose processing fees of 2 to 3%. The only fees deducted from crypto gifts made through Crypto for Charity's platform are the exchange fees imposed when the asset is liquidated.
3. To make a statement - Many crypto users view this emerging technology as a force for good in the world and want to help others see it the same way. By engaging in crypto philanthropy, they are demonstrating a new way for others to have a positive impact on the causes they believe in.

What's next?

We're seeing more and more innovative crypto projects with exciting charitable components. There are artists working with great organizations to release collections for social impact. There are platforms encouraging users to donate in interesting ways. And there are simply holders of crypto assets who've done well and want to give back.

It will be exciting to see where it all leads this giving season and beyond!

(Ben Simon is the Director of NFT & Crypto Community Giving at Crypto for Charity. He's an active participant in digital art NFT communities, and he spent more than a decade consulting for leading global non-profits.)