The explosive growth of cryptocurrency in recent years has posed various questions for philanthropists, governments, NGOs, businesses and investors alike, requiring a robust, tech-savvy response that caters to the ebb and flow of financial innovation.
By 2023, the world is predicted to spend up to $15.9 billion in blockchain-related tech, demonstrating the increasing integration of cryptocurrency in daily life.
As for philanthropists and occasional donors, cryptocurrency donations are tax-deductible and not subject to capital gains tax, making it a simple, attractive option for many rising millennial millionaires or long-standing wealthy benefactors.
The question then becomes how the financial world evolves alongside the preferred giving habits of these individuals, requiring a deep sense of trust, seamless integration with existing tech and flexible giving options for a wide range of donor profiles.
Partnering with organizations that exist in the cryptocurrency space, advocating for more streamlined charitable giving platforms and offering ease of access to establish charitable funds are key components of this new philanthropic era.
Although crypto is poised to empower both donors and the charities they wish to support, non-profit organizations struggle to digitally transform, making crypto donations a missed opportunity that NGOs can’t afford to overlook. During the height of the pandemic, the Infoxchange Group released a report detailing non-profit struggles with relying on technology.
Despite 97% of charities experiencing disruptions due to Covid-19, only 30% of organizations had the technology to support remote work, demonstrating the digital delay that many cryptocurrency donors will need to overcome when giving to their preferred institutions.
Although demand for online currency is likely to grow, part of accelerating this process lies in the hands of charitable foundations — many of which could easily partner with SaaS platforms already working to support charities on their journey to accepting cryptocurrency.
Rather than managing the intricacies of the value of each cryptocurrency, of which there are 4,000, charitable funds both large and small can rely on the technological know-how of software companies whose expertise lies in the differences between Bitcoin and Libra, for example.
Some forms of cryptocurrency have a particularly philanthropic bent, with Munchcoin raising $2.7 million in charity, donating to nonprofits that aim to alleviate water scarcity and world hunger. Accepting Munchcoin, or other forms of online currency, could also provide a more seamless way for charitable foundations to support the growing need for NGOs to take on the crypto challenge.
In addition to stimulating digital transformation by partnering with cryptocurrency platforms, charitable foundations should explore the myriad of giving options that now exist for donors of various financial backgrounds. Determining which funds best fit donor needs should include the option of giving in cryptocurrency, specifically in regard to donor-advised funds, or DAFs. DAFs have increasingly grown in popularity in recent years.
This is primarily due to the ease with which they can be established and the flexibility they afford to donors or donor-investors seeking to pool together various assets to maximize their philanthropic impact.
DAFs aren’t as limited as other charitable funds in that they aren’t required to make a particular amount of grants each year and can easily receive cryptocurrency gifts. In some cases, DAFs can be established online in mere minutes without any minimum threshold, opening the door to donors who may have smaller wallets but just as much interest in giving.
The nearly instantaneous nature of DAFs and their lack of stringent regulation lends itself well to crypto donors. They may desire to wait on giving rather than be required to donate their Ethereum or Dogecoin when it might not be as lucrative.
After witnessing a period of turbulence, cryptocurrency is now riding a new wave of mainstream acceptance, creating a ripple effect in the fintech world and offering itself as a legitimate giving option for philanthropists of all stripes.
Charitable foundations are at the crux of whether crypto will continue on this successful path in the non-profit space, with much depending on technological integration and ease of access. By partnering with platforms that understand the crypto market and relying on fast-growing, flexible charitable funds like DAFs, the cryptocurrency trend has a fighting chance at being more than a fad.
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