Charities are Receiving Millions in Crypto Donations, Smaller Nonprofits May Fall Behind

Cryptocurrencies have not only redefined the worlds of exchange, investment and currency, but have also begun to reinvent charitable giving across the globe, the Associated Press reported. But as some large organizations see crypto donations worth millions, smaller nonprofits unequipped to accept and manage the volatile currency may fall behind in revenue. Part of the pull in using cryptocurrency to make donations rather than regular cash is that donors can receive income tax deduction and are able to forgo the capital gains tax. If they converted the virtual currency back into cash before donating, they would have to pay the tax, leaving less money for their charity or nonprofit of choice, the AP reported. Fidelity Charitable, the top grantmaker in the nation, has been given more than $274 million in crypto donations so far this year, a sum that nearly quadruples its previous contribution record in 2019, according to a company spokesperson. Engiven, a donation hub for cryptocurrency, announced last month that a $10 million Bitcoin donation was made to an unnamed faith-based organization. Large organizations like the American Red Cross and Save the Children have managed to find ways to accept or convert cryptocurrency donations. However, many smaller organizations in the U.S. are still trying to determine if and how to accept them, said Rick Cohen, the chief communications and operating officer at the National Council on Nonprofits. "For a lot of organizations, it feels a little bit scary because it's not the contribution of dollars that they're used to," Cohen said, adding that setting up a means to accept crypto donations is "not something that's free and easy." "And they need to figure out if there's even demand from their current donors to be able to do it," he said. For more reporting from the Associated Press, see below:

The global humanitarian organization Action Against Hunger started accepting cryptocurrency donations last year after a group of donors approached them about taking the assets, said Aron Flasher, who manages corporate partnerships for the organization. Since then, he said they've raised more than $1 million from virtual currencies. "We feel like we've brought our issues to a very diverse cohort of supporters that we may not be reaching otherwise," Flasher said. "And so far, all of our projections show it's just going to increase." A Pew Research Center survey released last week indicated 16 percent of Americans have invested, traded or otherwise used cryptocurrencies in some way. Driven by interest from millennials, the digital currencies have become more mainstream since Bitcoin's creation in 2009 but skeptics said their use is just a passing fad. Gary Gensler, the chairman of the Securities and Exchange Commission, said in September investors lacked enough 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 the digital assets pose more risks for money laundering, terrorist financing and other crimes. And some countries have moved to outlaw the transactions.

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Tax savings was a driving force behind donating cryptocurrencies to charity, according to a Fidelity Charitable report released in October, which said a majority of about 400 investors indicated the deductions influenced their decision. Many investors also reported difficulty finding organizations that accepted the virtual currencies, which could be volatile for charities to hold. When Ethereum co-founder Vitalik Buterin donated $1 billion worth of Shiba Inu coin—known as a "meme" or joke coin—to the India COVID-Relief Fund in May, the disclosure of the transfer drove down the token's price 50 percent. Two months later, Sandeep Nailwal, the aid group's founder, indicated only $20 million had been used due to complexities with both converting the cryptocurrency and complying with government regulations in India regarding the assets. (The value of Shiba Inu has since surged in price ). The volatility in the crypto world is the reason why some giving platforms and donor-advised fund sponsors, like Fidelity Charitable, convert them into cash right away. Pat Duffy, the co-founder of the popular cryptocurrency donation platform The Giving Block, said though it's rare, some nonprofits who use the platform choose to hold the assets. Fidelity places the cash from crypto in a donor-advised fund, which allows donors to get tax deductions upfront before distributing any of the money to a working charity. "You can have a situation where somebody donates cryptocurrency, and if we don't sell it right away, it could lose 20 percent of its value in a day," said Tony Oommen, a vice president and charity planning consultant at Fidelity Charitable. "Or It could go the opposite direction," Oommen added. "But we don't try to speculate on that." Fluctuating prices aren't the only concern. The environmental advocacy organization Greenpeace stopped taking Bitcoin earlier this year, citing environmental worries associated with mining the digital currency. Despite this pullback, James Lawrence, the CEO of the donation platform Engiven, said he believes the majority of nonprofits will begin accepting crypto donations within the next five years. "By most estimates, there's less than a few thousand that accept crypto," he said. "There's a lot of room for growth." Pete Howson, a senior lecturer at ​​England's University of Northumbria who researches cryptocurrencies, said the use of the 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 were spent. Connie Gallippi, the founder and executive director of The BitGive Foundation, which runs GiveTrack, said the report simplifies transactions recorded on the blockchain and shows donors what their contributions bought. She said the report also shows donors how a charity spends funds it converts into a local currency. Gallippi said the software's goal is to increase transparency in the nonprofit sector, adding any criticism of tracking is unwarranted because charities can decline to accept restricted donations. "It's transparency at its best when you have no control over the data that's presented," she said. "Other than your actions that are behind that data."