- What is a crypto donation?
- Benefits of donating cryptocurrencies
- How crypto donations work
- What cryptocurrency can I donate?
- How can I receive donations in cryptocurrency?
- 1. Through a 501(c)(3) intermediary
- 2. Through specialized crypto processors for non-profit organizations
- 3. Through cash desks of crypto exchanges
- 4. Through a crypto wallet
- 5 organizations that accept cryptocurrency donations
- 1. Red Cross
- 2. Foundation for the Protection of Human Rights
- 3. Rainforest Foundation
- 4. Project “Water
- 5. Electronic Frontier Foundation
- Final thoughts
As the saying goes, “no man is an island”. Giving back to society is probably the fundamental duty of all its members. As a rule, individuals and companies make their contribution in the form of monetary donations, transferred directly NGO and other organizations that promise to help those in need.
Despite the growing number of scams committed in the name of charity, since 2020 there has been a 20% increase in online donations. Amid the setbacks and hardships caused by the global COVID-19 pandemic, many are still eager to help the less fortunate, and a new type of donation is gaining public attention.
Recently, the concept of cryptocurrency donations has gained popularity as a safer and more transparent way to do good. Crypto donations have generated a lot of interest from both beginners and experts in the world of cryptocurrencies, but many people still do not know how this process takes place. This guide covers everything you need to know about crypto donations.
What is a crypto donation?
Cryptocurrency is a digital currency created with code and managed by a regulatory body, often decentralized. There are various cryptocurrencies available today, the most popular of which are bitcoin and ether.
Cryptocurrency donation involves the transfer of funds from exchanges or wallets Web3.0 (such as MetaMask) to the account of the recipient (often an NGO).
Benefits of donating cryptocurrencies
- Transparency, speed and cost-effectiveness: The public nature of the blockchain ledger allows for the transparent movement of money – which is arguably more secure than conventional currency systems that require third parties to control transactions. This transparent and efficient money transfer system reduces transaction fees and minimizes the time it takes to complete transactions.
- Cryptocurrencies are getting more and more secure: With the arrival of cutting-edge technologists as leaders in the industry, the crypto space is being created with the best infrastructure for processes ranging from secure storage to dispute resolution. As the insurance industry embraces cryptocurrencies and introduces policies to cover certain losses, potential donors are likely to be more relaxed.
- Anonymity: In the traditional donation model for charities, those who wish to remain anonymous must trust the organization to hide their identity. On the other hand, with crypto donations, the public ledger keeps the cash flow accountable… even without being linked to the donor’s personal ID.
- You can easily accept international donations: Since agencies do not handle the flow of cryptocurrencies, organizations can accept donations from donors around the world without facing exchange fees and bank delays when checking funds.
- Crypto donations help more money reach nonprofits: Cryptocurrency donations come with a low processing fee for all parties involved, ensuring that the majority of donations actually reach the non-profit mission. Additionally, when non-profit organizations file tax returns, crypto donations are classified as “non-monetary” gifts and thus exempt from taxation.
- Donor Tax Savings: The IRS classifies crypto donations as property, which means they will not be subject to capital gains for tax purposes. Taxpayers can claim the entire amount of the donation as a charitable deduction and avoid capital gains taxes (the difference between the sale price and the purchase price) if they donate cryptocurrency directly to a charitable organization.
If a taxpayer sells crypto and then donates the money after taxes, then the capital gain will be subject to short-term or long-term capital gains tax depending on how long the donor held the crypto before the sale. If the asset has been owned for at least one year, then capital gains tax rates in the long term will be 0%, 15% or 20% depending on the amount of taxable income. Short-term capital gains are considered ordinary income and are taxed at rates ranging from 10% to 37%.
How crypto donations work
Charitable donations using cryptocurrencies are becoming more and more popular among individuals and organizations. Some of the most famous charities around the world including Red Cross и United waynow accept donations in cryptocurrency.
However, most charities cannot directly accept crypto donations due to the technical difficulties involved in creating a digital wallet. Instead, they accept crypto donations through third party processors or through a charitable foundation.
Third party processors such as Crypto for Charity, allow you to make crypto donations to charities by converting the donated cryptocurrency into cash on their behalf. These processors usually charge a small transaction fee (usually 1%) for their services.
Charitable foundations, which are also 501(c)(3) public charities, serve as an effective tax solution for accepting cryptocurrency donations. They can facilitate the acceptance of crypto donations as they have the resources and experience to evaluate, receive, process and liquidate non-cash assets.
For example, Center for Excellence in Education (EEC, a 501(c)(3) charity that sponsors science and math events for high school students and teachers, recently began accepting bitcoin donations and other crypto contributions through Crypto for Charity.
Since 2018 site GiveCrypto.org is also trying to alleviate poverty by accepting direct community-based crypto donations. In 2019 UNICEF became the first UN organization to store cryptocurrency and conduct cryptocurrency transactions through a specially created cryptocurrency fund.
The ability to quickly and anonymously donate cryptocurrencies from any country without high fees is a unique technological innovation that makes crypto donations easier, more efficient and fairer.
What cryptocurrency can I donate?
Although Bitcoin is the most widely used crypto asset, various organizations are willing to accept donations in Ether, Litecoin, and other cryptocurrencies.
Some organizations looking to avoid the risk of crypto volatility are also willing to accept donations in USDC (fully collateralized and exchangeable for US dollars) or similar stablecoins.
How can I receive donations in cryptocurrency?
1. Through a 501(c)(3) intermediary
Acceptance of cryptocurrencies through an intermediary 501 (c) (3) or charitable foundation (DAF) exempts non-profit organizations from the responsibility for holding the received cryptocurrencies, which greatly simplifies the legal, accounting and administrative aspects. The intermediaries handle the conversion process and receive tax receipts, after which they issue a cash donation to the organization.
Since the legislation regarding cryptocurrencies is constantly changing, the intermediary is most suitable for non-profit organizations that do not want to get involved in the game of “keep the order”, but still want to offer donors the opportunity to donate cryptocurrencies.
2. Through specialized crypto processors for non-profit organizations
Payment processors such as The Giving Block и engiven, help non-profit organizations accept cryptocurrency donations into their own wallets. For a fee, these companies handle the transactional aspects of the process, including automatic cash conversion and tax receipt management. They can also help create marketing campaigns for the crypto community.
Since the cryptocurrency will be held by a non-profit organization, it will need help with bookkeeping and complying with IRS rules. If a non-profit organization decides to hold cryptocurrencies as an investment, it must also consider asset volatility and develop a liquidation policy.
This approach is ideal for non-profit organizations that want to make crypto a central aspect of their assets and are looking for a ready-made donation widget with automatic receipts.
3. Through cash desks of crypto exchanges
Exchanges such as Coinbase and BitPay, offer built-in checkout options with automatic crypto-to-cash conversions for a minimal fee. However, this is a generalized consumer experience and is not intended to be donated. Therefore, non-profit organizations will have to deal with donor support, collecting information about them and tax receipts.
This approach is ideal for non-profit organizations that need an embeddable widget with minimal fees and don't mind managing the administrative and operational aspects themselves.
4. Through a crypto wallet
A crypto wallet allows users to send, receive and store crypto coins. There are many types of wallets, such as hardware and software, storable and non-storable.
The most important point in this approach is the secure storage for access to wallet credentials. Since no real information about the donor is associated with transactions, a clear record of transactions must also be kept.
5 organizations that accept cryptocurrency donations
1. Red Cross
International Network Red Cross, with a presence in almost every country, is the largest humanitarian network in the world. Activity Red Cross and Red Crescent has one main goal: to provide non-discriminatory assistance to those who suffer during conflicts, natural or man-made disasters, or in situations of chronic poverty.
Accepted Cryptocurrency: Bitcoin, via BitPay (Editor's Note: BitPay may charge a conversion fee for donations).
2. Foundation for the Protection of Human Rights
The Human Rights Foundation (HRF) is a non-partisan, non-profit organization dedicated to protecting and promoting human rights around the world, especially in closed societies. The mission of HRF is to ensure the preservation and promotion of freedom throughout the world; it brings people together to defend human rights and promote liberal democracy.
Accepted cryptocurrencies: Bitcoin and Ethereum
3. Rainforest Foundation
Rainforest Foundation helps secure land rights for indigenous peoples. The Rainforest Foundation strengthens Indigenous land security and educates communities on the use of technology to protect their forests. Through private equity, he connects people who are deeply focused on preserving their ancestral lands with the tools, training and resources to protect the rainforest.
Accepted cryptocurrencies: Bitcoin, Bitcoin Cash, Ether and Litecoin.
4. Project “Water
The Water Project, a 501(c)(3) non-profit organization, unleashes human potential by supporting sustainable water projects for communities in sub-Saharan Africa. The goal of the project is to help those who needlessly suffer due to the lack of clean water and proper sanitation.
Accepted cryptocurrencies: Bitcoin, Bitcoin Cash, Ether, Litecoin and donations in USDC (via Coinbase Commerce).
5. Electronic Frontier Foundation
Electronic Frontier Foundation (EFF) was founded in 1990 to protect free speech, user privacy, and innovation through policy analysis, grassroots activism, litigation, and technology development. Given the prevalence of technology fraud in today's society, EFF works to ensure that the rights and freedoms of users are improved and protected.
Accepted cryptocurrencies: Bitcoin, Bitcoin Cash and Ethereum
Final thoughts
Making crypto donations is very easy. Simply select the organization you wish to support, find out what type(s) of crypto they accept, and then donate your crypto funds easily and securely.
However, before you donate to any organization, always do your research. No matter how safe crypto transactions may seem, danger is always lurking around the corner (or, in this case, in the depths of the Internet), and scammers use every opportunity. Once you are sure that the organization you choose is trustworthy, crypto donation is a fantastic way to make a difference in people's lives.