Cryptocurrency — digital or virtual — is popping up in the nonprofit sphere as a viable donation option. Nonprofits can use cryptocurrency in various ways, such as making payments for goods and services or even holding onto a certain amount of crypto as an investment for the long term.
In 2021, the American Cancer Society (ACS) received its largest cryptocurrency donation of $250,000. According to The NonProfit Times: "ACS accepts a wide variety of cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, Litecoin, and others. The nonprofit works through a third party to establish a digital wallet for ACS, which does not hold or own cryptocurrencies, converting the gifts to U.S. dollars through the digital wallet."
As the CEO of a nonprofit for over 10 years, I have a lot of experience navigating donations in times of economic and technological change. And although accepting cryptocurrency donations seems like a good option, there are some things to be aware of before making that decision. Let's first start with why nonprofits should be considering cryptocurrency at all.
Why Should Nonprofits Care About Cryptocurrency?
Nonprofits may feel intimidated by the technical challenges and legal ambiguities of incorporating cryptocurrency. But with cryptocurrency's market cap exceeding link $2 trillion in 2021, there is a lot of wealth there and nonprofits can capitalize on this trend so long as they accept tax-efficient donations.
Even larger nonprofit organizations such as the American Red Cross, UNICEF, and Greenpeace are now accepting cryptocurrency donations. More organizations are expected to follow suit over the next few years.
What Are the Pros and Cons of Crypto as a Donation vs. Other Currencies?
Although still extremely valuable, cryptocurrency is very different than traditional currency such as the dollar bill. Listed below are the pros and cons to be aware of.
Pros:
Cryptocurrency provides a new and alternative way for people to make donations, which can help attract a wider range of donors and increase overall funding.
Potential to make more money. There are certain cryptocurrencies that increase in value overtime, which could increase the monetary value of donations you've received.
Increased transparency. Blockchain technology keeps records of cryptocurrency transactions and can allow you to prevent or trace back any fraudulent or illegal activity.
Removes barriers to international donations. Cryptocurrency transactions can be made seamlessly between countries through the use of blockchain technology.
Cons:
Operational complexity. Cryptocurrency transactions can be complex and require additional compliance with tax laws and regulations
Volatility. Cryptocurrency values can be highly volatile, which can make them a risky form of donation.
Security risks. Cryptocurrency transactions are vulnerable to hacking and fraud, which can put nonprofits at risk of losing funds.
3 Tips to Help Nonprofits Start Using Cryptocurrency
A study by Fidelity Charitable found that cryptocurrency investors are more charitable than the average investor. If you have decided that accepting cryptocurrency donations is right for your nonprofit, here are tips on how to dip your toes in the water.
1. Matching Fund Opportunities
Consider creating a matching fund program that doubles cryptocurrency donations with traditional currency donations to attract more donors and increase funding.
2. International Donors
Consider offering cryptocurrency as a form of donation for your international donors in effort to make the exchange more convenient for them.
3. Crypto-Asset Investment for Long-Term Programs
Consider holding onto a certain amount of crypto as an investment for long-term projects, as the value of crypto may increase in the future.
As cryptocurrency as a form of payment becomes more mainstream, you will be glad you started learning about how to use it wisely now. Use the information above to make a decision for your nonprofit to see if investing in cryptocurrency is worth it for you and consider some of the ideas listed above to try it out! You may be surprised by the outcome.
Kevin Xu is the CEO of MEBO International, a California- and Beijing-based intellectual property management company specializing in applied health systems. He also leads Skingenix and is a co-founder of the Human Heritage Project.