How is Cryptocurrency Impacting Philanthropy?

There is no question that cryptocurrency’s growing popularity as an investment opportunity will translate into an attractive asset-based charitable giving strategy. The IRS designated digital currency as a form of investment property in 2014, and since then it has become the fastest growing donation type for Fidelity Charitable. 

It should not be surprising that mega charities like Fidelity, Schwab and Vanguard, along with tech-savvy foundations like the Silicon Valley Community Foundation, are leading this philanthropy trend. Smaller grassroots nonprofit organizations may not have awareness or policies in place for this relatively new giving option. Depending on their supporters, they may not feel that it will be a popular or relevant for them. The urgency of establishing a gift acceptance policy for digital currency donations may feel like a matter that can be delayed for a few more years...perhaps until the first donor asks about making such a gift.

Cryptocurrency is not regarded by conservative investors as a serious investment opportunity because of its volatility. For those who wish to protect their wealth and oversee steady growth in the long term, the wild downswings of the digital currency market are unsustainable. However as more bullish investors join the fray, an amazing growth in charitable giving has bloomed from the profits.

The DogeCoin online community has fostered a culture of charitable giving, with many fundraising appeals focused on addressing global poverty, disaster relief, or animal care. Crypto giving nonprofits like GiveCrypto.org have popped up to link donors with individuals in need, and lists of nonprofits that accept digital currency show where your crypto gift can make a difference. This new trend in philanthropic giving is flourishing in creative and impactful ways.

Setting up a Coinbase Commerce or Bitpay organizational account is easy and saves on payment transaction costs. However the volatility and rapid, 24/7 nature of trading on these markets is what demands nonprofits prepare themselves to quickly respond to offers of a digital currency donation. An individual who holds digital currency that is losing value and is seeking a charitable tax deduction may require a rapid response from a fundraising professional - or go elsewhere with their donation. If the nonprofit organization is prepared to accept digital currency donations, they also should be ready to quickly cash out this donation before its value deteriorates. 

Consider when Ethereum founder Vitalik Buterin donated $1.5 billion in digital currency to COVID-relief in India...which quickly lost 40% of its value. This donation was so large and widely publicized that the nonprofit organization, India Covid-Crypto Relief, had to issue a statement that they would “act responsibly” not to hurt the price of the digital market, because if they immediately sold such a large amount of those assets it could exacerbate the downward spiral. 

This example is an outlier, and nonprofits that don’t specialize in cryptocurrency philanthropy won’t be approached with mega-donations like this. But anyone could be offered a donation of Bitcoin, Ethereum, or one of the other cryptocurrencies - and it probably won’t be in the middle of a market rally. Investors will be trying to cash out on their asset gains with a tax deduction before or during a downswing, and nonprofits need to be ready to jump into action to benefit from their gift. In 2018, Ted Rogers was approached by his alma mater Landon School to make a $100K donation - but when the option to give via Bitcoin was suggested, he doubled his gift to $200,000. “I simply could not have made the gift in the size and in the short time frame that I wanted if Landon had not accepted Bitcoin.”