Over the last decade, cryptocurrency has been slowly taking the spotlight as a go-to currency for charitable donations, and it looks like the trend will continue to rise.
According to Insider Intelligence, the amount of adults in the US who own and use cryptocurrency for payments is surging, and the largest cryptocurrency investor group will soon be adults aged 25 to 34. This rising generation is inspired by direct donations towards social and environmental issues focusing on impact investing. And through these direct donations, cryptocurrency (crypto) philanthropy is forming.
Crypto philanthropy continues to inspire young donors and the growing population of crypto billionaires. However, crypto philanthropy differs significantly from traditional ways of giving. These differences are changing donor demographics (i.e., creating a younger donor base for charities), building more funding models (such as working in areas like impact investing and Donor Advised Funds), and even expanding the reasons for why donors give. Here’s how.
Cryptocurrency, often known as 'crypto' in shorthand, is a digital currency. Crypto is bought, held, and traded using blockchain technology. Blockchain is a decentralized technology spread across many computers (the opposite of a centralized bank) that manages and records transactions. The appeal of blockchain technology is its security and privacy.
In 2017, an anonymous donor by the name "Pineapple Fund" made headlines by giving nearly $55 million in cryptocurrency to 60 charities. This was the launch of the crypto-donating trend. From there, donations have continued to climb, as well as the number of nonprofits now accepting this type of asset.
Thanks to the founder of the Pineapple Fund sharing his commitment to giving away his crypto wealth, the Crypto Giving Pledge now exists. This pledge is a bit different than the original Giving Pledge, which is a promise by the world's wealthiest individuals and families to dedicate most of their wealth to charity.
Instead, the Crypto Giving Pledge, founded by The Giving Block, is a commitment by any crypto investor to donate at least one percent of their crypto holdings to charity annually. You can check out the list of pledges and, in most cases, track the investor's annual contribution. Since any individual with crypto has the potential to join this giving pledge, or even just become a donor to a charity, the popularity of crypto philanthropy is continuing to rise.
While crypto is volatile, crypto philanthropy is becoming increasingly popular, and most nonprofits cannot accept direct donations of crypto. This is due to the complexity of setting up a digital wallet. That’s where resources like The Giving Block come in handy. The Giving Block is a widespread cryptocurrency donation platform that has helped escalate crypto donation capabilities for nonprofits. It works with nonprofits to help them accept crypto, and helps donors give away this complex asset to charities.
This year, The Giving Block estimates it could raise more than $1 billion through its work with nonprofits and donors. This number is both impressive and possible, especially if we look at historic numbers. Donations of crypto in 2021 were just under $70 million, which was an increase of over 1,500% (yes, that's correct) from 2020. This means the rise in donations from 2021 to 2022 could increase more than tenfold.
Crypto to Charity is another platform working with nonprofits and donors to accept and send gifts of crypto. The organization compares the process to opening a Donor Advised Fund. Here is how the process works:
The average crypto donation on The Giving Block in 2021 was $10,455-- an increase of 236% from the previous year. This type of consistent revenue for nonprofits can go a long way towards boosting communities. According to Yahoo Finance, as of March 2022, crypto donations passed $83 million, and more than $52 million of that total went towards supporting the Ukrainian government and organizations supporting its fight against the Russian invasion.
Likewise, there is a new platform called Engage Raise, which enables political candidates to raise campaign funds through crypto. According to CNBC, crypto executives have already given over $30 million in crypto contributions to federal candidates and campaigns since the 2020 election cycle.
As nonprofit organizations of all sizes continue to see the potential in diversifying revenue streams through the acceptance of unique assets like crypto, there will be more developments of pro-crypto nonprofits that have the capacity to fundraise through new strategies. Furthermore, assistance from third party organizations like The Giving Block, Engage Raise, and Crypto to Charity will continue to advance.
Besides the benefit of doing good in the world by giving to charitable causes, donating crypto directly to a charity can also help a donor avoid paying capital gains taxes on the donation. It is just like donating appreciated assets directly to a nonprofit. A donor can also get a federal income tax deduction for making a charitable donation. As a taxpayer, a donor may have to file IRS Form 8283 (instructions) for gifts of Bitcoin. Speak with your tax advisor to learn more about this process.
Crypto philanthropy, the practice of donating cryptocurrency to charitable organizations, is likely going to continue to become a desirable source of fundraising for nonprofit organizations. As the number of crypto billionaires and even the average-size crypto fund holder climbs, so will the number of nonprofits accepting these digital assets.
The increasing number of crypto fund holders, combined with the ongoing volatility of the global crypto markets (which soared to an all-time high of $3 trillion in November 2021) is continually catching the attention of the charitable sector. What will be most helpful to nonprofits-- and even crypto donors-- is for the early adopters of crypto philanthropy to share their stories about how they are navigating these new streams. Together, we can build a stronger, more sustainable cycle of giving.