Curious About Cryptocurrency Donations? We’ve Got Answers

People want to donate in cryptocurrency.

With cryptocurrency reaching over $2 trillion in market cap in 2021 and donors eager to support the organizations they care about in a tax-efficient way by giving crypto, nonprofits that take advantage of this new giving vehicle stand to gain a lot.

Keeping up with the different ways your supporters want to give can be tough. Surging interest in cryptocurrencies especially has left many nonprofits feeling behind and intimidated by the technical challenges and legal uncertainties around accepting crypto donations.

What is cryptocurrency?

It’s, in a nutshell, digital money. The main difference from fiat currency such as the US dollar is that there is no central authority printing or governing the money— that’s all managed using algorithms. When money exchanges hands, transactions are verified and recorded in a decentralized ledger such as a blockchain, rather than a bank.

There are thousands of cryptocurrencies, some of the most popular including Bitcoin and Ethereum which are valued at thousands or tens of thousands of US dollars per “coin”. The value of a coin is determined by market demand based on crypto exchanges such as Coinbase or Gemini.

Why do donors want to donate cryptocurrency?

For those people who hold appreciated crypto, donating that crypto can be an attractive way to support the nonprofits they care about. Donating crypto is a nontaxable event. The IRS currently treats crypto donations similarly to stock in that donors will not recognize capital gains on the donation and may be able to deduct the fair market value of their donated crypto on their taxes, leaving them able to make donations much larger than they would have otherwise. 

What are the barriers to accepting cryptocurrency donations?

There are technical barriers such as how to accept the donations securely, issue receipts, and exchange crypto for cash. While platforms exist to help ease these transactional burdens, there are also operational considerations to make as a nonprofit.

Especially for smaller organizations, it could be difficult to navigate the changing rules around accepting cryptocurrency donations. Regulations are still in flux and the Financial Accounting Standards Board (FASB) has yet to issue clear accounting guidelines. There’s also additional IRS paperwork that nonprofits have to file when accepting crypto donations.

Due to these hurdles, previously only large or tech-forward organizations were able to take advantage of crypto donations.

But now, there are options for organizations who want to dip their toes in without taking on all the risks, thanks to platforms like Every.org and Network for Good.

To learn more, watch the full webinar, What Your Nonprofit Needs to Know About Cryptocurrency, here!

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