Raphael Mazet from Alice, a financial platform for measurable impact projects, told Decrypt that the fate of cryptocurrency and philanthropy do meet. The idea brings forth an important question – Do technology and humanities intersect? Technology and charity are widely different worlds. But, Blockchain is the bridge that connects the two worlds.
The distributed, decentralized nature of the Blockchain is the perfect solution for leveling the pitfalls for non-profits. Crypto nonprofit is slowly gaining pace, and popular non-profits are diversifying their revenue streams. The primary reason for the wave is the exponentially growing crypto exchanges and crypto investors in the game and the tax-advantages crypto donations offer.
According to Fidelity Charitable, 45% of crypto investors contributed $1,000 or more to charitable organizations in 2020. In December 2008, Unicef announced investing USD 1,00,000 in blockchain startups. However, unlike the commercial benefits other arenas aim for, non-profits can leverage blockchain technology to acquire much more.
The article explores the concept of crypto for nonprofits, the benefits of accepting crypto donations, and how to accept them.
Why Should A Nonprofit Accept Cryptocurrency?
- Crypto Charity renders tax advantages.
- Helps to diversify nonprofit revenue streams
- An increasing number of crypto investors
- Crypto donations help maintain transparency.
- Accepting crypto donations creates a future-proof organization.
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Crypto charity or crypto philanthropy donates cryptocurrency instead of cash, stocks, or assets. Although crypto charity still needs to be accepted worldwide, the number of crypto donors is increasing rapidly. Moreover, crypto charity is changing donor demographics, funding models, and the face of charity altogether.
In 2014, United Way Worldwide, the largest privately funded non-profit, declared it would accept Bitcoin donations through Coinbase. This move proved to have positive momentum, further inspiring many crypto donations to nonprofits. Later As We Grow, The Water Project, and Freedom of Foundation, amongst others, started accepting cryptocurrency as donations.
Recently, many events have even shaped donating crypto for nonprofits:
- United Way announced the acceptance of bitcoin donations.
- Popular cryptocurrency exchanges like Binance and Coinbase have created crypto foundations and portals.
- Millennials hold most of the cryptocurrency; the changing donor demographics have transformed charity.
- The current situation in Ukraine consolidated cryptocurrency appeal.
How Nonprofits Can Use Blockchain?
People often associate Blockchain with cryptocurrency. People even use the two terms interchangeably. As we know, Blockchain is the technology behind cryptocurrency.
But, Blockchain has far-reaching applications beyond the crypto realm. The applications of blockchain technology vary from supply chain management to digital voting, business process management, and even non-profits.
Unlike a commercial company, the primary objective of non-profits does not revolve around making money. Non-profits can leverage Blockchain in project management, analytics, and accounting.
Non-profits leverage blockchain technology as it is the right solution for the following problems:
- Corruption and accountability
- Trust and Transparency
- Anonymous Donors
- Emergency Aid
- Identity Rights and Cybersecurity
How To Accept Crypto Donations?
- Hands-off: Accepting crypto payments through a crypto payment processor like BitPay and converting crypto donations into cash at a small fee. It is the fastest and simplest way for nonprofits to accept crypto.
- Hands-on: Receiving and holding cryptocurrency through wallets owned by the organization.
- Third-party plugins and platforms: Another way for crypto donations is by integrating third-party plugins and platforms.
Can Nonprofits Invest In Cryptocurrency?
Recently, cryptocurrency investors have gained positive momentum. Can nonprofits invest in cryptocurrency? The answer is yes – non-profits can invest in crypto but subject to certain conditions. Every state defines a law called the Uniform Prudent Management of Institutional Funds Act.
The Act states that charities, trusts, and organizations related to fiduciary responsibilities must outweigh the risk-return spectrum of investing in cryptocurrencies before taking a huge step.
Does that mean non-profits should not invest in cryptocurrency? The Act does not prohibit non-profits. However, given the highly volatile nature of cryptocurrency, experts advise non-profits against holding a higher percentage of their portfolio in cryptos.
On the other hand, holding a higher percentage of investments in cryptocurrency could even lead to violating state laws.
How To Get Cryptocurrency Donations?
After gauging on means of accepting donations, the next step is deciding on the source. Platforms like BitPay, Geminin, and Giving Block provide tools to accept donations from crypto donation platforms.
Besides, you can obtain donations directly. For example, non-profits like Save the Planet, WaterAid, and Give crypto have direct options for crypto charities.
Why Donate Crypto To Charity?
- Tax deductions
- Avoid capital gain tax.
- Support a cause
The concept of crypto for nonprofits is still in the initial stages. Although blockchain technology solves the de-facto problems of non-profits, such as corruption, accountability, transparency, and identity rights, it is not the ultimate solution for all.
Besides, many non-profits usually prefer accepting conventional revenue streams rather than cryptocurrency. And ”cryptocurrency” is a buzzword for many; learning and adopting such emerging technologies demands time and resources.
Before transitioning to crypto donations, non-profits should ponder a few questions– Are crypto donations the only solution? Are they ready for the change? The initial stages of the transition could be daunting; hence, involving partnerships for valuable advice and a smooth transition is essential.
Non-profits are inching towards crypto charity; leveraging blockchain technology offers several benefits to improve the world.