Crypto Is Coming: Are Religious Nonprofits Ready For It?
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As of January, 56% of the largest U.S. charities now accept cryptocurrency donations.
According to The Giving Block, a crypto-giving platform for charities, more than $2 billion in crypto has been donated to nonprofits since 2018.
Earlier this year, the U.S. Securities and Exchange Commission approved 11 new bitcoin exchange-traded fund, or ETFs, leading many to believe digital currencies are becoming more mainstream.
Ministries like World Vision and Compassion International have already incorporated crypto donations into their fundraising options.
Others are still trying to figure out if the rewards outweigh the risks for their ministries, and what exactly the rise in crypto-philanthropy means for nonprofits.
For donors, there is a definite appeal. Not only do they get to claim a tax deduction, but they also don’t have to pay capital gains taxes on the donated crypto.
“The charitable deduction is so valuable,” says Andie Kramer.
Kramer is a lawyer who advises clients on charitable contributions, digital assets, and crypto. She sees crypto as an opportunity for nonprofits “to expand your donor base and charitable contributions.”
This diversification is a big reason World Vision decided to accept crypto donations. In a statement to MinistryWatch, the organization said that “cryptocurrency donations can provide an additional revenue stream, diversifying funding sources and potentially reaching new donors who prefer using digital assets.”
Millennials and Generation Z make up 94% of all crypto buyers. The Giving Block reports that “crypto donations have become the fastest-growing giving method for young donors, with more than $400 million in crypto donations made to nonprofits in 2021.”
While crypto donations do carry benefits, there are also important considerations.
Picking a platform
There are multiple ways to accept crypto donations — some easier than others. The National Council of Nonprofits lists four options: A donor advised fund, a crypto-donation platform like The Giving Block or Engiven, a crypto exchange, or a dedicated wallet to receive donations without an intermediary.
Each of these platforms has benefits and drawbacks, and it’s important for nonprofits to research which one will work best for them.
“Nonprofit leaders need to be educated on what to do with the crypto when they receive it,” says Nils Smith, co-author of “Crypto for Good: Demystifying Cryptocurrencies for Nonprofits.”
He recommends using a third-party platform, such as Engiven (Smith also sits on the advisory board of Engiven).
“You don’t want to be the one processing. You use a third-party to make it easy for donors and yourself so you can focus on the ministry,” he notes.
Third-party apps vary in terms of their pricing tiers, but they offer the benefit of converting the crypto donation to U.S. dollars and automatically processing receipts.
Policies and procedures
Along with a chosen platform, nonprofits are also responsible for ensuring their policies and procedures around crypto donations are up to date.
If a nonprofit decides to accept crypto, they “need to update their gift acceptance policy,” says Alex Wilson, co-founder of the Giving Block.
That’s because crypto is considered an in-kind gift in the eyes of the IRS. And nonprofits have to adhere to the tax reporting required for these types of gifts.
The Evangelical Council for Financial Accountability has taken note of the rise in donations and recommends Capin-Crouse’s guidelines on tax reporting.
Convert it quickly
Another general consensus is that nonprofits need to convert their crypto donations quickly.
“The best course is to automatically convert and put the cash to use,” Wilson says.
The reason being crypto markets are volatile. In November of 2021 a bitcoin was worth more than $68,000, but a year later was trading below $20,000.
Smith agrees. “In the last month bitcoin has varied by 20% of its value. … If you can (convert) it instantaneously it helps for bookkeeping purposes to have the same value as it was donated. If you sit on it you’re gambling with donor dollars. That’s not a wise use.”
Scams and hacking concerns
Some nonprofit leaders have raised concerns about hacking and criminal activity when it comes to cryptocurrencies, since there isn’t much oversight from governments or banking systems.
Smith says this is a fair concern — there are people using crypto for nefarious reasons. But that doesn’t mean it isn’t an “asset that can be used for good as well.”
“We have to be wise with it, to make sure we’re not gambling with it, or holding it in a digital wallet we don’t know how to secure,” he said. Especially since individual wallets are susceptible to hackers.
The Giving Block screens donations through the Office of Foreign Assets Control sanctions list.
If an illicit transaction were to happen, “we could refund it and send money back,” Wilson said. “We use the same tools the U.S. government uses for law enforcement. OFAC and FinCEN (Financial Crimes Enforcement Network) will create a blacklist of wallets. It’s more regulated than people realize.”
Still, it is possible for individuals to make anonymous donations with crypto, and the nonprofit might not ever have an idea of who or where the donation came from.
In addition, Christians should be wary of crypto scams, especially pastors preaching “get rich quick” schemes involving cryptocurrencies — like Eli Regalado, a Denver pastor who recently defrauded more than 300 people.
Is crypto here to stay?
Investors and interest in crypto continue to grow. Last month, the total market value of bitcoin went past the $1 trillion mark.
Smith believes that “as an asset class (crypto is) going to continue to grow, from an adoption standpoint it’s going to continue to grow … from a donor engagement opportunity (it) will continue to grow.”
The truth is, though, “most ministries get 2-3 (donations) a year. It’s not a mass surge, but we are seeing over time people wanting to give different types of assets, and crypto is just one of those,” Smith said.
Wilson agrees. He believes crypto will just become part of an organization’s overall fundraising plan.
“The key thing for them is thinking about it holistically. It doesn’t need to be off on its own island,” he said.
As far as the future of giving?
“It’s part of it,” Wilson says. “And it’s only going to become a bigger part of it. I don’t think 100% of giving is going to be crypto, but it will become a bigger piece of the pie.”
This piece is republished from MinistryWatch with permission.
Brittany Smith is a freelance writer living in Colorado Springs. She is the co-author of Unplanned Grace: A Compassionate Conversation on Life and Choice.