Friday, May 20, 2022

The trend of donating cryptocurrencies to nonprofits

Dorothy A. The Johnson Center for Philanthropy published its report on 11 Trends in Philanthropy in 2022. The number one trend is the donation of cryptocurrency by Julie Couturier to nonprofits. This is a well written report, and I recommend reading it. Below is a brief summary of the topics discussed in relation to cryptocurrency and nonprofits.

Cryptocurrency donations to nonprofits began in 2017 when the Pineapple Fund began gifting 5,104 bitcoins, valued at $55 million to 60 charities. The hope is that as a new class of donors become wealthy with these volatile, confusing and difficult to understand digital assets, more and more cryptocurrency will be donated to donor-advised funds and directly to nonprofits.

This emergence of gifting cryptocurrencies is an opportunity for nonprofits. For US donors, the gift of cryptocurrency is a non-taxable event, and as such no capital gains tax is payable. Another advantage of using cryptocurrency is for international transactions that are done in a matter of moments and for a nominal cost rather than traditional transactions that incur significant fees to complete as well. The advent of cryptocurrency has created a new set of donors, which are the younger generation, Millennials and Gen Z.

Cryptocurrency has risks. Some argue that the cryptocurrency should be sold immediately upon receipt, and others argue that it belongs to the nonprofit. Blockchain transactions are secure, but anonymous, non-profit opening, if the payer becomes problematic later, could at least cause reputation damage and possibly money laundering charges at worst.

Despite this, with 300 million individuals holding cryptocurrency around the world, nonprofits cannot ignore donations of cryptocurrency. These donations will require considerable planning for both the nonprofit and the donors.

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