Why Should You Consider Accepting Crypto Donations?
Crypto exploded in 2021, when coin values hit all-time highs and the topic of cryptocurrencies was highly visible in the media. The number of crypto owners is increasing exponentially, with at least 295 million people actively using cryptocurrencies worldwide.
A Pew Research Center survey shows that 16% of U.S. adults have invested in, traded in, or used crypto – about 41 million people – and a study from Gemini found that over 41% of crypto users made their first investments in 2021.
With the prevalence of cryptocurrencies increasing, the number of crypto donations is also on the rise. More people have crypto to give, and, in general, crypto owners are more generous. Fidelity Charitable found that 45% of crypto investors gave more than $1,000 to charity in 2020 versus 33% of all investors. The Giving Block reports that the average cryptocurrency donation amount was $10,445 in 2021 – 82 times larger than the average online cash donation.
The greatest incentive for giving crypto is relieving the donor’s tax burden. When a donor gives crypto instead of cash, they don’t have to pay capital gains taxes, and they may also receive a federal income tax deduction for the value of the gift. When donors avoid capital gains taxes, they often transfer these savings onto the nonprofit, which means bigger gifts from the same donors.
Offering crypto as a giving option can help secure more gifts for your organization from this fast-growing segment. Because crypto users are also predominantly Millennials and Gen Z (together accounting for 94% of this donor pool), accepting crypto donations can help build a strong pipeline for lasting giving from a younger cohort as you signal to this audience that your organization is a viable option for them to direct their charitable dollars. In addition to opening the door to a new donor pool, it’s a valuable opportunity to educate new donors and make it easier for them to give.
Key Steps to Accepting Crypto Donations
1. Make sure fundraising best practices are already in place.
Before accepting a new revenue stream, ensure that your organization has the basic tent poles already in place:
- Do you currently fundraise on social media? (Twitter is crypto users social media platform of choice).
- Do you currently accept a variety of payment methods (e.g., DAF, stock, QCD gifts) with appropriate acknowledgements?
- Does your website share information about how to give through these various methods, with strong calls to action? Is your website mobile responsive?
- Do you have up-to-date gift agreement policies and procedures?
If not, discuss with your leadership what needs to be implemented before launching your nonprofit into crypto philanthropy.
Attracting crypto donors takes time and effort, just like any other type of donor. Your revenue through this channel will reflect the amount of time you put in. Without some investment of time and resources to raise awareness and excitement about this giving option, you are unlikely to see great returns.
2. Promote crypto giving to your donor base
Include crypto giving information and calls to action on a unique donate page, on your “Ways to Give” page, and as a P.S. in fundraising emails. Make sure your website is user-friendly and looks great on desktop, mobile, and tablet. Promote crypto giving on your social media platforms and in conversations with donors. Crypto will likely be a relatively small percentage of overall giving in 2022, but you want to be ready when donors come to you, especially as there is potential for some very large gifts.
3. Liquidating crypto assets immediately is considered the least risky option
Crypto is by far the most volatile asset you will receive, so most nonprofits prefer to sell crypto donations immediately for cash. Turnkey processes exist to facilitate conversion of crypto donations into fiat currency, similar to those followed by most nonprofits when receiving gifts of stock. Following these best practices helps prevent discrepancies between the amount donated and the amount received.
One notable exception: Charity Water set up a special fund, the Bitcoin Water Trust, which holds on to Bitcoin donations in trust until at least 2025, after which proceeds will be used to fund clean water projects.
4. Educate your staff and Board about crypto philanthropy
Your staff – especially development and marketing teams – should have a basic understanding of how crypto works. Gift officers should think holistically and be able to talk about diverse ways of giving like crypto, stocks, DAFs, and so on to best help donors choose the right option for them. Marketing staff should message crypto philanthropy the right way to avoid confusing your audience. For example, consider targeting individuals in cities with high concentrations of crypto users, like the San Francisco Bay Area, New York City and Brooklyn, and Los Angeles, and focusing on younger donors, young professionals, and donors in tech professions. Remember to also educate your Board members so they are aware this is an option and can act as your ambassadors in promoting it.
5. Be sure to follow appropriate tax laws
The IRS treats crypto donations like gifts of property, which follow a different set of rules than gifts of stock, for example. Platforms like The Giving Block and FreeWill, which offer crypto giving processing solutions, can help you navigate this, ensuring that your organization remains compliant with IRS regulations.
6. Participate in existing crypto philanthropy campaigns
Take advantage of crypto philanthropy giving days to promote your cause, like #CryptoGivingTuesday and #BagSeason, which bring visibility to nonprofits that accept crypto and inspire crypto users to donate to charitable causes before the end of the year. In doing so, you show your audience and prospects that you accept crypto donations, celebrating the impact this emerging force in philanthropy can make at your nonprofit and demonstrating that your organization is part of current conversations in finance and philanthropy.
In 2021, donors gave $2.4 million to nonprofits on #CryptoGivingTuesday through The Giving Block, a 583% increase from the previous year. The Giving Block projects $1 billion in crypto donations will be processed in 2022.
Crypto philanthropy doesn’t have to be intimidating! If you do choose to pursue crypto giving, make sure to do your due diligence (just as you would for any other giving method), set up the appropriate infrastructure, and approach and cultivate donors with the right messaging. You could unlock a new world of possibility in support of your nonprofit’s mission.