Accepting Crypto Donations
What is cryptocurrency?
Cryptocurrencies, or crypto, are digital forms of money that can be used to buy goods and services or held onto as long-term investments (like a stock). They are typically intended to eliminate the need for banks and middlemen because they’re “decentralized.” This means that no single entity controls the supply of cryptocurrency. Instead, decentralized cryptocurrencies commonly use a distributed ledger (a “blockchain”) managed by a peer-to-peer network that works together to record and validate transactions. You can learn more about crypto and what it means for philanthropy here.
Why is crypto an attractive donation vehicle for donors?
Many cryptocurrencies are highly volatile assets and can appreciate quickly. When they are sold and converted back into dollars or other fiat currency, income taxes may be owed on any gains. Such taxes, however, can be avoided, if appreciated crypto is donated to charity, rather than converted back into regular currency. For owners who have seen their crypto grow dramatically in value, the tax benefits of donating part of their windfall to charity are substantial, helping them avoid capital gains taxes and maximize the impact of their charitable giving. Such donors may also be able to receive federal income tax deductions, up to the full value of the gift, if they have held their crypto for more than a year.
How do crypto donors compare to my current donor base?
Owners of cryptocurrency tend to be younger and more urban and represent an opportunity to court active donors in their 20s and 30s who may not have been on your major giving radar in the past. Research suggests that they are more charitable than other types of investors.
What has made it hard for nonprofits to accept cryptocurrency to date?
If your organization isn’t set up to accept crypto donations and doesn’t know how to get started, you’re not alone. More than 90% of nonprofits don’t currently have a crypto solution. While they know there is growing interest in crypto giving, nonprofits lack the technical expertise and exchange accounts they need to accept most (or any) crypto donations, and their staff may need training to feel confident in even discussing the topic with donors. And many of the nonprofits who are positioned to encourage and accept cryptocurrency donations nevertheless lack the knowledge to manage their holdings of these relatively volatile assets.
Crypto for Charity’s solution overcomes these common hurdles, allowing nonprofits to benefit from crypto donations without having to establish an exchange account, or provide educational resources and training for their personnel. Crypto for Charity also mitigates market and volatility risk by liquidating donated crypto assets immediately. Nonprofits instead simply receive the proceeds of crypto donations in cash, while their donors automatically receive an emailed tax receipt from our affiliated public nonprofit, FreeWill Impact Fund.
How does crypto mining affect the environment?
You may have heard that crypto mining uses a lot of energy, as miners set up large server farms dedicated to validating transactions posted to the blockchain in order "mine" new cryptocurrency tokens as a reward. We understand that this is a concern for many nonprofits, while we also recognize the value and innovation in this new industry, as well as its potential to generate substantial new sources of donations to charity. We're closely following research and the efforts being made to shut down outdated farms and focus on renewable energy sources.
Additionally, many cryptocurrencies, like Ethereum (since September 15, 2022), XRP, Algorand, Solana, Cardano, and Tezos use a substantially more energy-efficient method of verifying their transactions.