Cryptocurrency and the blockchain technology it is built upon remain enigmatic to most Americans. And yet the major cryptocurrencies have enjoyed dramatic increases over the last several years and especially the last several weeks. Two weeks ago, Bitcoin—the largest and most well-known cryptocurrency—hit a new all-time-high, followed by a sharp decrease and then healthy recovery. This past weekend, Ethereum, the second largest cryptocurrency reached its own all-time-high, while breaking other important records for investors.
Many speculate that these current rises are due to “institutional money” breaking into the cryptocurrency market, driving these sharp gains. Nevertheless, the technology and the utility of “the blockchain” are no less puzzling to the average person.
Because of the wall of confusion, few nonprofits have invested the time or energy to avail themselves of receiving crypto donations. Often such recommendations are met with scoffing condescension: crypto is a flash in the pan, a new an untenable currency, a distraction, a hoax, an occupation for unemployed “techies.”
Regardless of whether any of these criticisms are valid (they aren’t), they don’t hold water as excuses to avoid accepting cryptocurrency donations. Here’s why getting into the crypto market is worth your time: it’s easy and it doesn’t take much time (if you have a halfway decent web designer).
The middle of last year, a client of mine received a Bitcoin gift worth roughly $100,000. Today, assuming they held the asset, it would be worth roughly $310,000, just several months later. You may have seen that last week Roger Ver, the founder of Bitcoin.com, announced two gifts of Bitcoin Cash totaling $2,000,000 made to the Foundation for Economic Education. This comes after a $1,000,000 Bitcoin gift to FEE back in 2013.
Ver says that FEE fostered his interest in a free marketplace, separate from state control, which led to his interest in the blockchain. Now he’s giving back to FEE to advance their work to promote free markets and economic literacy. Of course, your nonprofit is probably not attractive to crypto investors for the same reason, but increasing philanthropic activity with cryptocurrencies should spur nonprofits along to stop ignoring this space.
If you’re sitting there thinking that cryptocurrency is small beans and not worth your time, think again. There is serious money out there in cryptocurrency—much of it held by young people who came upon it almost by accident and not sure what to do with it, and much more of it held by seriously wealthy and likely philanthropic individuals. All in all, cryptocurrency donations amount to roughly $300 million annually.
It’s important, if you want to have a successful nonprofit, to have a diverse portfolio of revenue streams. Don’t say no to direct mail to focus on foundations. Don’t say no to foundations to focus on major gifts. And don’t say to no to cryptocurrency, which simply offers donors and potential donors another way to support your organization’s mission.
Not only that, crypto offers donors the most secure way to support your organization. With growing concerns around donor privacy, the security and privacy of the blockchain may be attractive to donors large and small—especially if “de-platforming” and public censorship become increasingly common in the coming months and years.
Of course, this raises a further question about how much information to gather or require when accepting gifts of cryptocurrency, which is really the same question about receiving any online donation. The less “friction” there is—that is, the fewer fields for a donor to fill out—the more likely they are to complete the transaction. On the other hand, the more information you acquire, the more you can communicate with them and steward them. Insofar as the blockchain enables completely anonymous giving online, it forces the question again as to how much information to acquire. (This question will be partially answered by what tool you use to accept gifts of cryptocurrency, namely a QR code or a donation widget.)
As a final note, one more question to consider if you begin accepting cryptocurrency donations: you better have an investment policy in place. The crypto marketplace is unusually volatile, and you don’t want to make these decisions on a case-by-case basis—and you certainly don’t want to be responsible for an investment decision that goes poorly. Before you begin accepting gifts of cryptocurrency, determine whether you will sell immediately, hold indefinitely, or diversify part of the gift. Whatever you decide, it should be a written, board-approved policy.
Cryptocurrency is a young and growing marketplace, and if you step into the space now, you can be at the forefront of the movement as it gains credibility and its philanthropic activity increases. It will be interesting to watch how the IRS and federal regulation affect crypto donations, and how the mainstream familiarity with the blockchain grows the marketplace. Whatever happens, now is the time to spend a few minutes looking into how to begin accepting gifts of cryptocurrency and tasking your web designer with adding the option to your donate page. You have countless priorities as a nonprofit leader, but there is no reason to carve out time to widen the funnel through which revenue can come into your organization.
If you would like to discuss receiving cryptocurrency donations for your organization, feel free to shoot me an email at firstname.lastname@example.org.