They’re volatile, yes, but the overall trend in cryptocurrency prices — at least over time — has been up and to the right.
Not all that long ago, for example, bitcoin flirted with $68,000, though more recently traded at about $58,000. But that’s leagues above the fractions of a penny that it first fetched in 2010 and the roughly $3,600 seen three years ago.
Holders of bitcoin and other digital offerings such as Ethereum are looking for ways to give a portion of those outsized gains back, creating a new subsector of the crypto economy: crypto philanthropy. And increasingly, charities and nonprofits are looking for ways to accept crypto and keep it on their balance sheets. For many donors and charities alike, Giving Tuesday (Nov. 30) could look a whole lot different this year.
In an interview with Karen Webster, Pat Duffy, CEO of The Giving Block, said that the explosion of charitable giving runs counter to the impression that crypto is simply a haven for criminals seeking to sidestep the traditional financial system.
We’re well beyond those Wild West days of unregulated crypto, where transactions were hard to source and hard to track, and no one wanted to report what they were doing.
PYMNTS research shows that as many as 17% of individuals have had at least some experience with cryptocurrencies, and more than 11% of consumers are currently holders, implying that a significant percentage of that population may have gains that that they might like to use to benefit charities.
Given the fact that crypto is one of the best performing asset classes of the past decade, they might also want to minimize tax burdens.
The profile of a charitable crypto donor, said Duffy, differs from the traditional charitable giver. Crypto donors are in their late 20s or early 30s, he told Webster. The average gift across the Giving Block platform stands at $11,000 he said, far outpacing the average traditional charitable gift of about $128.
And, as Duffy said of these crypto donors, owing to their relative youth: “They have a long lifespan across which they can keep giving to nonprofits — and using crypto, well, that’s not just their money, it’s their culture.”
Yet many of these same individuals, he said, are not inordinately wealthy individuals — and they need some help with tax literacy.
Against that backdrop, the Giving Block operates as an online platform that Duffy says acts as the “connective tissue” that makes it possible for donors to use crypto in their charitable giving (and for nonprofits to accept it).
The ripple effects are positive ones across what The Giving Block has termed its “crypto donation ecosystem,” Duffy said, boosting nonprofits’ coffers while helping the donors minimize the tax burden associated with the crypto.
Charities and nonprofits include Save the Children, United Way, and the American Cancer Society, as well as faith-based organizations and universities. Donors can give directly on nonprofits’ sites using widgets or select from a list on The Giving Block’s website.
The company also sponsors the Crypto Giving Pledge — a yearly commitment through which participants donate 1% or more of their crypto holdings to charity.
Duff said that his firm partners with regulated crypto exchange, wallet and custodian Gemini, which vets nonprofits to ensure they’re legitimate.
Said Duffy: “It’s almost impossible to tell the difference between how a crypto exchange and a bank are regulated.” So it would be as hard for a fraudulent non-profit to open an account with The Giving Block as it would be to open a bank account with any major financial service provider.
Filling the Acceptance Gap
The Giving Block traces its genesis to Duffy’s experience with the crypto bull market that marked 2017 to 2018.
Back then, he worked as an integration director with the Lupus Foundation of America, where, as he told Webster, he saw his nonprofit and others miss out on donation opportunities — including cryptocurrencies — because they didn’t have the tools to accept them.
Duffy said that in the past few years, The Giving Block has built out Crypto-Philanthropy programs for hundreds of nonprofits.
The programs, said Duffy, include building awareness and fundraising campaigns. In a nod to crowdfunding activities, the company has 16 “Cause Funds,” which enable people to donate to specific interest areas — art and culture, for instance, or environmental causes.
A Tax Strategy for Cryptos
Duffy explained that donating crypto is a lot like giving stock — a donor would conceivably donate their most appreciated asset in order to get the biggest tax advantage. Even if crypto prices dropped precipitously, holders would still have realized significant gains and be looking to minimize their tax burdens.
“A lot of folks aren’t aware of the fact that you can donate crypto or property assets — just like stocks — to charities to offset your taxes,” Duffy said. “And now that crypto is so easy to transfer, so accessible, and such a high percentage of people are now holding onto it, it’s just becoming more a part of the conversation with traditional tax advisors.”
The charities and nonprofits themselves, said Duffy, are interested in using the crypto they receive for treasury management and other corporate activities.
“They’re looking for one effective solution provider on that front,” said Duffy. He noted that many of The Giving Block’s corporate clients use the platform’s “auto conversion” feature to immediately convert donations into cash — and then make their own strategic, decisions around how much of their endowment or treasury they’re going to diversify into specific cryptos.
The company has said that it will process as much as $1 billion in crypto donations in 2022, with $100 million likely in 2021.
Building the “connective tissue,” he said, between charitable organizations and donors wielding crypto, “can incentivize community behavior — and encourage consistent donations to nonprofits.”