Cryptocurrency Fundraising Considerations for Nonprofits
by Karla Patten
Despite the recent bankruptcy of crypto exchange FTX, the market for cryptocurrency is huge with a global market capitalization at $858 billion as of early December. Interest in cryptocurrency continues to grow, and now, many nonprofits are weighing the pros and cons of incorporating virtual currency into their fundraising strategies. According to The Giving Block, a crypto donation platform, cryptocurrency fundraising is the fastest growing donation method today, due to its tax efficiency and the rapidly growing crypto user base. Before your organization jumps in, however, it’s important to do your homework as you consider this option. The following Q&A will help guide you through this decision-making process.
What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that is secured by cryptography, making it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology — a distributed ledger enforced by a disparate network of computers. In general, cryptocurrencies are not issued by any central authority, rendering them theoretically immune to government interference or manipulation. Source: Investopedia
Who are crypto donors?
To understand the fundraising opportunity in cryptocurrency, it’s important to understand the demographics of crypto donors. Data from The Giving Block shows this group possesses the following characteristics:
- Young — average age in the 30s
- Wealthy — average annual income of $111,000
- Generous — 36% of crypto investors are more likely to donate $1,000 or more
- Average donation size of $10,500
What are the tax implications for crypto donations?
Cryptocurrency and NFT (non-fungible tokens) donations are tax-efficient for both the donor and the charity, according to Vault12. In the U.S., crypto donors pay no capital gains tax on donations to 501(c)(3) organizations, and nonprofits receive 100% of the donation tax-free. Nonprofit charities are exempt from paying capital gains tax when they sell assets, so the full value of the gift stays intact.
For more information, see the IRS’s Frequently Asked Questions on Virtual Currency Transactions.
Why should nonprofits consider cryptocurrency fundraising?
With tax benefits and a generous donor base, crypto fundraising is a huge opportunity for many nonprofits. Philanthropy News Digest notes that while the cryptocurrency community was originally comprised of tech-savvy, privacy-focused individuals, “today, cryptocurrency adoption is much more widespread, and as it grows in popularity, the potential benefits for nonprofit fundraising are becoming too great to ignore.”
A number of well-known nonprofit organizations already accept donations in crypto, including St. Jude Children’s Research Hospital, American Cancer Society and Save The Children.
How can nonprofits incorporate crypto into their fundraising strategies?
There are a number of crypto donor platforms that can help your organization add these capabilities to your fundraising efforts. The Giving Block, for example, provides secure donation tools that allow nonprofits to accept crypto gifts that are immediately converted into U.S. dollars. Another platform called Every.org lets your organization accept crypto donations from your website. The crypto is received by Every.org, converted and granted in cash to help you simplify your accounting practices. Here are some additional resources to help you find the best solution for your organization:
- What Your Nonprofit Needs to Know About Cryptocurrency Donations, National Council of Nonprofits
- How Your Nonprofit Can Accept Gifts Of Cryptocurrency, Forbes
What are other considerations associated with cryptocurrency fundraising?
A major concern for many nonprofits is the volatility of cryptocurrency. Thankfully, solutions like The Giving Block, Every.org and others help mitigate that risk by immediately converting crypto donations into U.S. dollars.
Another issue relates to the environmental impact associated with cryptocurrency mining, the process used to generate new coins and verify new transactions. Crypto mining requires vast amounts of power, threatening our ability to reduce dependence on climate-warming fossil fuels. If your organization has an environmental focus, crypto fundraising may not be the best fit for your mission or your donor base.
There are also a number of limitations placed on crypto advertising. If you’re planning to use social media to promote your crypto fundraising efforts, it’s important to understand the restrictions each channel places on crypto advertising to ensure compliance.
If you’re looking for general information about cryptocurrency, take a look at the following resources:
- Bank Rate: Cryptocurrency Statistics 2022: Investing in Crypto
- Investopedia: Cryptocurrency Explained with Pros and Cons for Investment
- Nerd Wallet: Cryptocurrency: Definition and Current Prices
Disclaimer: This article is for informational purposes only and not intended as legal or financial advice. Please consult a professional (accountant, attorney, tax advisor) for the latest and most accurate information. We make no representations or warranties as to the accuracy or timeliness of the information contained herein.