[GUEST POST] Top 5 Questions About Cryptocurrency Donations
We’ve Spoken to Hundreds of Nonprofits and Heard it All
When someone mentions cryptocurrency, what do you first think of? If you’re like most people, you’ll quickly jump to a news headline you once read but maybe didn’t investigate very much. Or maybe you wrote it off because it seemed too complicated.
As cryptocurrency goes mainstream with companies like Facebook creating their own cryptocurrency, crypto may soon be used by billions of people. It might not be long before you’re using cryptocurrency for your everyday purchases and don’t even realize it. It’s not as scary as it sounds.
In this post, we break down some of the most common questions we get from nonprofit executives around cryptocurrency donations.
1) How many people use cryptocurrency?
- Over 70 million people use cryptocurrency, but this number is increasingly rapidly.
- COVID-19 has pushed record numbers of people to buy bitcoin, some even depositing exactly $1,200.
- For the last five years, more people have done a Google search for “donate bitcoin” than “donate stocks” due to the tax benefits and ease of use (more on this later).
2) Isn’t cryptocurrency unregulated and use by criminals?
- Cryptocurrencies are more regulated than most people realize.
- They are regulated by many of the same government agencies that regulate the traditional world of finance, including the IRS, SEC, CFTC and local regulators.
- Cryptocurrency is the most transparent form of money ever created, meaning criminals are less likely to use it because there is a public record of every transaction.
- Funny enough, your current donors are more likely to be criminals. Cash is 800 times more likely to be used for money laundering. The U.S. dollar is still the preferred black market currency, but you don’t hear compliance departments talking about that!
3) How do you handle Bitcoin and Crypto volatility?
- Bitcoin and cryptocurrency are no doubt volatile, at least compared to traditional investments like stocks or bonds.
- Although it might not be intuitive, this is actually a good thing and part of a new and growing industry: Volatility creates more trading/profit opportunities and makes it more likely that users have new capital gains on a regular basis.. Internet companies in the 90’s were the same way.
- As the industry matures, market activity will normalize.
- For nonprofits, there are features that allow you to automatically convert to U.S. dollars so volatility isn’t a concern.
4) Do people really donate cryptocurrency?
- Each year, $200-$300 million is donated in cryptocurrency, and this number will continue to grow as the cryptocurrency market grows.
- Major crypto gifts haven’t slowed down with COVID-19 and have actually picked up.
- Millions in crypto have been donated toward COVID-19 relief alone.
5) Isn’t cryptocurrency complicated?
- Cryptocurrency isn’t as easy to use as your typical iPhone app yet, but accepting cryptocurrency donations has never been easier.
- There is no need to create your own solution when getting set up to take cryptocurrency donations. Using an existing solution designed for nonprofits helps save you time and money in getting setup correctly.
Although the above questions might come to mind for you when you think about cryptocurrency donations, when a crypto user thinks of nonprofits, the first thing they often think of is taxes. The IRS and many international tax agencies classify cryptocurrency as property, which means donating cryptocurrency to a nonprofit is similar to a stock donation from a tax perspective. For many people, that means it is the most tax efficient way to donate.
Cryptocurrency users are financially savvy and looking for ways to offset capital gains. Donating that appreciated crypto directly to a nonprofit is one of their best options. Give them that option the next time they go to donate and you might just see a 20% larger donation!
by Alex Wilson & Pat Duffy, Co-Founders of The Giving Block
The Giving Block makes it easy for nonprofits to accept cryptocurrency donations and for supporters to donate in a more tax efficient way. As a nonprofit, you can have your donations automatically converted to USD. As a donor, you get an automatic tax receipt as soon as your transaction goes through.