The price of Bitcoin crossed the $50,000 milestone in February and total cryptocurrencies climb to historical levels in 2021 crossing $1.5 trillion in market cap. This rapid growth also means there will be a quickly minted generation of millionaires that may start considering philanthropy.
If you’re at a nonprofit trying to understand this new audience it is important to consider some of the bedrock beliefs of the community. This starts with the firm belief in the decentralized power of the currency. Based on conversations among crypto thought leaders, this belief in decentralized power also carries pessimism in fiat currency controlled by governments. Here is a response to defining what fiat currency is, by renowned investor Naval Ravikant on the Tim Ferris podcast:
“Fiat currency is just a paper that’s backed by nothing. So before it was shell’s then we went to gold. Then we went to gold-backed paper and now we’re down to just paper.”
Tim Ferris Podcast Interview
What this may mean for charities is that when the issue of capital gains tax comes due for these new millionaires the option of direct donation of Bitcoin, Ethereum and other altcoins may become very attractive. This is because a donation of crypto directly to a charity would be set to the market value on transfer, avoiding the tax necessary to liquidate the asset. Basically, the gift to a registered 501c(3) would be *20% more valuable and the donor receives that full value of the gift (*depending on the tax rate applied) .
What’s more, this type of donation will likely be more inline with their beliefs as the alternative would be to pay more in tax to government policy that the donor may not support. The nonprofit can then also potentially gain from that asset as it may continue to grow tax-free.
4 Reasons Why Crypto Donations Make Sense
Just to map this out here are the super clear reasons why new crypto donors will increase donations to nonprofits:
1. It’s tax deductible. If you have a Schedule A and itemize deductions, you can deduct the amount of your donation without capital gains tax.
2. It’s secure. The transaction is encrypted and authenticated. The charity never has access to the private key of a wallet.
3. It’s fast and transparent. The transaction goes through quickly, in some cases as soon as the next business day and the transaction is on the blockchain, so anyone can view it. This is a big deal for 501(c)(3) organizations, which must maintain transparency.
4. Public interest vs Government Policy. It directs money to social causes that align with the donor rather than general taxes. Especially in the case of larger capital gains this may be attractive to crypto investors.
Online Course
Online Fundraising Essentials
Build a successful online fundraising strategy from the ground up
How to donate Crypto Currency
Ultimately all it takes is the public address of a verified charity’s wallet or the address of a provider that can securely distribute those funds. Here is a list of some organizations
- TheGivingBlock.com: allows donations to flow to nonprofits in their network that donors can choose.
- Fidelity Charitable: For new crypto users, Fidelity offers the ability to donate crypto through a more traditional passthrough.
Or find nonprofits that have direct ways to donate crypto on their donation options like:
- Save the Children
- WaterAid
- Give Crypto: a crypto fund created to help Venezuela, arranged by Coinbase.
How to accept crypto currency as a nonprofit?
For nonprofit’s looking to make a huge commitment to crypto donations there are ways to create a legal account associated with the organization. Groups like BitPay, Gemini, and The Giving Block provide donation tools that allow nonprofits to accept crypto gifts.
The Giving Block offers tools for nonprofits to embed donation forms that accept donations. This process removes a lot of the risk associated with operating a wallet for an organization.
What to consider when creating a crypto giving campaign
The next level of crypto donations is learning about NFTs for fundraising.