Are You Ready to Ride the Tidal Wave of Crypto Philanthropy?

The $16 Trillion wealth transfer from Baby Boomers to Millennials is happening NOW. It’s good news, and even better news for philanthropy.

The good news is that “nearly nine in ten Millennials say charitable giving is an important part of their lives.” AND “three-quarters of Millennials consider themselves philanthropists.” [1].

The better news is that “Thirty-five percent of young investors say they own cryptocurrency—and among those who don’t, half say they will consider investing in the next year.” [1]

So what IS Cryptocurrency?

Cryptocurrency, or Crypto, is a digital form of money that can be used to buy goods and services or held onto as a long-term investment–like stock.

So, why is the Crypto wave good and better news for nonprofits?

If nonprofits can provide an easy way to give crypto, they can tap into this growing segment of wealthy donors.

AND,

It quickly gains in value. Even though Cryptocurrency is a highly volatile investment, cryptocurrency tends to gain value fast. (The value of a single Bitcoin grew to an all-time high of more than $66,000 in October 2021.)[1] That means that a donor can give you bigger gifts than if they just gave cash

If donors give Crypto directly, they avoid capital gains taxes. Like stock gifts, when a donor directly gives you crypto (rather than selling it first and giving you the cash), they avoid capital gains taxes and get the tax deduction for the value of the gift!

More crypto buyers means more new donors. As more people–especially Millennials – buy crypto, more will want to give some of those massive gains to charity in a tax-savvy way.

Five Steps Nonprofits Should Take Before Accepting Crypto Donations

BEFORE you begin preparing to accept crypto, do your homework. You and your organization’s leadership should understand what crypto is, how to account for it in your books, as well as its pros and cons. Your donors give to you with the expectation that you will manage and spend their gifts safely and securely.

The five steps you can take to get ready to accept crypto are

  1. Update your gift acceptance policy to state if and how you will accept gifts of cryptocurrency. Here’s some sample language:
    • The organization may accept gifts of crypto-assets and other forms of digital assets after due diligence is performed to determine that the asset is able to be transferred and liquidated. [2]
    • Note: Because crypto is so volatile, your policy and/or procedures should specify that all crypto gifts will be liquidated (sold for cash) UPON RECEIPT. This practice will also help you avoid any accounting discrepancies in the donated value and the actual cash proceeds.
  2. Set up an account with a cryptocurrency platform. To accept crypto, you’ll need to set up a crypto wallet or an account with a crypto payment processor. The most popular payment processors are BitPay and Coinbase. These platforms allow you to accept crypto donations and then automatically convert the crypto into US currency.
  3. Put a donation link and form on your “Make a Gift” and “Ways to Give” pages. Remember, crypto owners are probably Millennials. So, they’re tech-savvy and pretty unlikely to call or contact you. Make it easy for them to give online and you’ll get the gifts.
  4. Collect donor information to avoid anonymous gifts that you can’t thank and steward.
    • Crypto buyers don’t have to provide any identifying information when they purchase crypto. And their transactions are all recorded in long strings of letters and numbers that in no way directly link to their identity.
    • CONSIDERATION! One of Crypto’s biggest appeals is that it offers total anonymity to its users. But it’s hard for nonprofits to thank anonymous donors, steward them, or even provide the required tax receipts.
    • Avoid these problems by:
      • Including a form that asks for their contact info when they make a crypto gift. Give them a reason for giving you contact info like, “Will you help us provide you with a timely and accurate tax receipt by telling us who you are?”
  5. Know what the IRS requires in terms of forms and donor acknowledgment letters. [3]
    • IRS Noncash Contribution Documentation Rules [3] specify the forms required for reporting noncash gifts like crypto. Your gift acknowledgment letter should include the following:
      • Date of donation.
      • Name of the donor (or the agent acting on behalf of an anonymous donor).
      • Description of the donated asset (but not the value).
      • Name and tax status of the recipient organization.
      • Any restrictions on the gift that might affect the gift’s value.
      • The value and a description of any goods or services provided in exchange for the gift or, alternatively, a statement that no goods or services were provided in exchange for the contribution of the gift.

PRO TIP: Use DonorSearch Ai’s data visualization tool to discover the high-capacity, high-likelihood Millennials in your donor and prospect base.

Cryptocurrency is likely to be an increasingly popular asset for the next generation of wealthy donors in the future. If you have a plan in place that makes it easy for donors to give crypto to your organization, you will be an attractive recipient of gifts that will increase your fundraising and secure the future of your mission.

Footnotes:
[1] Cryptocurrency and philanthropy. Fidelity Charitable
[2] Bitcoin basics for NFPs: Accepting and valuing crypto-asset gifts, AICPA
[3] Cryptocurrency gift strategies for not-for-profits, Journal of Accountancy

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