Crypto philanthropy is the charitable giving of financial support by donating cryptocurrency instead of cash, stock or other assets. It’s a rapidly growing field of philanthropy that can have far-reaching implications on the association and nonprofit space. From 2020 to 2021, The Giving Block raised over 100 million in crypto donations and went from a few hundred nonprofits to over a thousand. So what does that mean for associations?
For non-profits, this is about simplicity. The ease of transferring crypto anywhere in the world has enabled them to work with donors, regardless of geographic location.
But for the donors, it's about economics. When given the choice between paying taxes or donating to a charity, millions of people opt to donate their crypto.
Despite all the volatility, crypto remains one of the best-performing assets of the last decade, topping equities, commodities and real estate.
Historically, people donate their most appreciated assets for tax reasons. Over the past few years, this has become cryptocurrency holdings for many.
Traditionally, Bitcoin had been the dominant cryptocurrency for charitable giving. But the landscape has become more diverse over time, with last year seeing over $30 million in donations given via Ethereum (ETH). This surpassed Bitcoin ($25 million) for the first time in history.
Combined, these two cryptocurrencies account for 78% of all crypto donations to The Giving Block - the leading crypto-donation ecosystem.
But while Ethereum and Bitcoin are the most popular names in these circles, several others exist. USDC became one of the most-donated cryptocurrencies to nonprofits last year, according to The Giving Block.
Interestingly, crypto philanthropy differs from traditional giving in three ways, donor demographics, funding models and the reasons for giving.
The average crypto donor is much younger than traditional givers. While the average donor in the nonprofit sector is 64, the average age of the crypto user is 38, and according to The Giving Block, the average crypto donation size is $10,000. Of that group, 76% are millennials, and 17% or Gen Z.
This makes the average crypto donor both younger and more generous than the average cash donor, reinforcing that associations need to start thinking about how they’re showing up for and connecting with younger members.
Most people donate to education, disaster relief, food and the environment. But crypto has a more flexible funding model. Unlike traditional fundraisers specific to an organization or cause, crypto donations have facilitated the creation of Impact Index Funds.
This allows donors to support a particular cause across multiple organizations simultaneously., with each non-profit receiving an equal share of the total donated amount inside the specified cause. This novel structure gives smaller non-profits equal footing alongside the larger and more popular non-profits.
Transaction costs for receiving crypto donations are lower than those for credit cards, debit cards and wire transfers. Frankly, this spurs more giving. Moreover, the transaction time for crypto donation can be just a few minutes. Meanwhile, cross-border transfers of fiat can take days, which is why members are quickly swinging to the use of crypto.
Perhaps most important, there is no need to convert out of crypto first. When donating a long-term appreciated asset, an investor can deduct the fair market value of the crypto at the time of a contribution without having to flip it into fiat. This saves capital gains tax that would otherwise need to be paid.
The reality is that crypto philanthropy lives in a fully online world. The digital nature of such charitable giving allows an ease of use that has never been possible. From finding worthy causes to the movement of funds, this version of clickable philanthropy is seamless. Of course, this makes the marketing and selling of the concept that much easier as well. It’s as simple as sending funds electronically and having an email receipt sent in reply.
Additionally, the number of investable options continues to grow. Crypto philanthropy indices are now easily searchable and investible for all donors on standard websites. The simplicity is driving a growing number of charities to enter the space. In turn, this competition for donors fosters additional investment options. So this dynamic will continue to expand into the foreseeable future.
Many association professionals are unaware of this growth's positive repercussions. Beyond all the good that charitable donation brings to those in need, the industry's acceleration also brings individual career and business opportunities.
The crypto-charities may be non-profits but they are still commercial organizations. That means they need a wide range of professional skill sets. For example, marketing and sales departments need to help raise awareness and campaigns. The same goes for sponsorship opportunities and partnerships with other organizations to help potentially form an impact index fund.
Preparing your organization to accept this new donation type and educating members will be a top priority.
The data reveals how crypto philanthropy has exploded over the last two years. Fidelity Charitable reported receiving $330 million in crypto in 2021. That was up from just $28 million in 2020. The Giving Block reported $69 million in total donation volume last year, an impressive 1,500% spike from 2020.
It's still the early days for crypto philanthropy, and volatility is another factor to consider, with Bloomberg reporting the crypto market capitalization has dipped below $1 trillion. While many investors are wary, more and more people recognize how big this market could get.
Cryptocurrencies continue to gain prominence in the financial sector – and philanthropies are seeking ways to leverage this new technology. As these organizations look for new fundraising approaches, accepting cryptocurrency donations is likely to become the rule, not the exception, which has implications for both standard business and the charitable sector.
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Marc spent 27 years as a sales leader on Wall Street's algorithmic/A.I. trading desks in New York City. He is founder and CEO of a content strategy firm, Anvictus, which serves FinTech and Blockchain scale-ups. Marc has published several hundred articles and videos on sales strategy through content. His work has been featured in media such as Bloomberg, Traders Magazine, CNBC and various business podcasts.
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