Charities see more crypto donations. Who does it benefit from?

As the biggest cryptocurrencies rise and fall in value, hitting record highs one week before declining the next, they increasingly become more important sources of income for charities. However, the number of associations accepting virtual currencies, known for their volatility, remains limited.

Bitcoin, the world’s largest cryptocurrency, hit nearly $ 69,000 for the first time in its history in early November, roaring after falling below $ 30,000 over the summer. The value of Ethereum, the second largest cryptocurrency, has also hit an all-time high.

Both cryptocurrencies fell from their all-time highs after helping push the overall cryptocurrency market cap beyond $ 3 trillion, according to pricing from CoinGecko. Another popular metric, CoinMarketCap, on Friday listed the market cap at $ 2.6 trillion.

So far this year, Fidelity Charitable, the nation’s largest donor, has received more than $ 274 million in cryptocurrency contributions, nearly quadruple its previous record of $ 69 million in 2017, said a spokesperson for the company. And the cryptocurrency donation platform Engiven said last month that it had accepted what it called the biggest Bitcoin donation known to date: a $ 10 million Bitcoin gift to an organization. denominational undisclosed.

Many large charities and international aid agencies, such as the American Red Cross and Save the Children, have mechanisms in place to accept cryptocurrencies or use platforms that help them convert it immediately into cash. But small organizations – which make up the vast majority of registered nonprofits in the country – are trying to figure out how to accept these currencies, or if it even makes sense for them to do so, said Rick Cohen, communications director. and operations. at the National Council of Associations.

“For a lot of organizations it’s a bit scary because it’s not the dollar contribution they’re used to,” Cohen said.

“It’s not something free and easy” to set up, he said. “And they need to determine if there is even a demand from their current donors to be able to do so.”

Global humanitarian organization Action Against Hunger began accepting cryptocurrency donations last year after a group of donors approached it to take the assets, said Aron Flasher, who manages the corporate partnerships. for the organization. Since then, he says, he has raised more than a million dollars through virtual currencies.

“We feel like we’ve brought our issues to a very diverse cohort of supporters that we might not otherwise reach,” said Flasher. “And so far all of our projections show that it’s just going to increase.”

A Pew Research Center survey released earlier this month found that 16% of Americans have invested, traded or used cryptocurrency in one way or another. Driven by interest from millennials, digital currencies have become more mainstream since Bitcoin’s inception in 2009, but skeptics say their use is just a passing fad.

Gary Gensler, the chairman of the Securities and Exchange Commission, said in September that investors lacked sufficient protection in the cryptocurrency market, which he called “rife with fraud, scams and abuse” and compared it to the “Wild West”. Regulators have noted that digital assets pose a greater risk of money laundering, terrorist financing, and other crimes. And some countries have decided to ban transactions.

Cryptocurrencies are an attractive asset to give as they allow donors to bypass capital gains tax. Donors would be subject to this tax if they converted the virtual currency into cash before donating it, meaning less money could go to the chosen charity. Another bonus is an income tax deduction.

Tax savings, according to the small number of cryptocurrency owners who donated a portion of their holdings to charity, drove their crypto giveaways, Fidelity Charitable reported in October. Many of these investors also reported difficulty finding organizations that accepted virtual currencies, which could be volatile for charities.

When Ethereum co-founder Vitalik Buterin donated $ 1 billion in Shiba Inu coins – known as ‘meme’ or joke coins – to the Indian COVID Relief Fund in May, the disclosure of the transfer lowered the price of the token by 50%.

Two months later, Sandeep Nailwal, the founder of the aid group, reported that only $ 20 million had been used due to the complexity of converting the cryptocurrency and complying with government regulations in India regarding active. (The value of the Shiba Inu has since skyrocketed.)

The volatility in the crypto world is why some donation platforms and donor-advised fund sponsors, like Fidelity Charitable, immediately convert them to cash. Pat Duffy, co-founder of the popular cryptocurrency donation platform The Giving Block, said that although it is rare, some nonprofits that use the platform choose to own the assets.

Fidelity places the crypto money in a donor-advised fund, which allows donors to obtain tax deductions up front before distributing some of the money to a working charity.

“You can have a situation where someone donates cryptocurrency, and if we don’t sell it right away, it could lose 20% of its value in a day,” said Tony Oommen, vice president and charity planning consultant at Fidelity Charitable.

“Or it could go in the opposite direction,” Oommen added. “But we’re not trying to speculate on it.”

Fluctuating prices aren’t the only concern. Environmental organization Greenpeace stopped taking Bitcoin earlier this year, citing environmental concerns associated with the exploitation of digital currency. Despite this setback, James Lawrence, CEO of the Engiven donation platform, said he believes the majority of nonprofits will start accepting crypto donations within the next five years.

“By most estimates, there are less than a few thousand who accept crypto,” he said. “There is a lot of room for growth.

Pete Howson, a senior lecturer at the University of Northumbria in England who studies cryptocurrency, says the use of virtual currencies could, in some cases, increase what he calls “surveillance philanthropy.” For example, GiveTrack, a cryptocurrency crowdfunding website, uses blockchain technology as well as material from charities to send donors reports on how their crypto contributions have been spent.

Connie Gallippi, founder and executive director of the BitGive Foundation, which manages GiveTrack, says the report simplifies transactions recorded on the blockchain and shows donors what their contributions have bought. She said the report also shows donors how a charity spends funds it converts into local currency.

Gallippi said the software’s goal is to increase transparency in the nonprofit sector, adding that any criticism of the tracking is unwarranted because charities can refuse to accept restricted donations.

“It’s transparency at its best when you have no control over the data presented,” she said. “Other than your actions which are behind this data. “

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