According to CoinMarketCap, the value of the 1,610 cryptocurrencies it
tracks is now over $411 billion. Nonprofits looking for a taste of that wealth
should, at a minimum, develop the policies and infrastructure to accept crypto
donations.
Much of the available wealth measured in crypto today is new. Bitcoin
traded below $200 as recently as January 2015 and has a value 44 times higher
at $8,854 as I write this. Other cryptocurrencies have had similar increases in
value.
It is important to note, however, that Bitcoin and some other
cryptocurrencies are well off their peaks. Late last year, Bitcoin traded near
$20,000. Still, substantial value is still tied up there. Bitcoin has a market
capitalization—value per coin multiplied by the number of coins in existence—of
just over $150 billion.
Before we continue, let me offer an important note of caution. This
article is not intended to opine on the question of whether buying or holding
any cryptocurrency is a good idea. It is clear that crypto is volatile
(read risky) and may not be an appropriate investment for
individuals or nonprofits.
Ryan Scott, ICO advisor who focuses on social impact applications at ICO
Impact, says, “I do believe nonprofits should start accepting
Bitcoin and other cryptocurrencies.”
He offers two reasons. First, he notes that simply accepting crypto and
converting to USD or “fiat” currency in the parlance of the crypto community,
referring to government-issued currency, will give nonprofits an education into
the use and function of a technology that promises to become as ubiquitous as
the internet.
The second reason: “There are a lot of very crypto-wealthy individuals
who have more money than they know what to do with, but one thing is for
certain - they aren't converting it to fiat.”
Amy Wan, founder and CEO of Sagewise, which is creating dispute
resolution infrastructure for smart contracts that use blockchain, the
technology that underlies cryptocurrencies, agrees. She notes that crypto
investors are unlikely to want to sell to donate, preferring instead to
contribute the crypto if only to avoid transaction fees.
Lisa Fabiny, the Director of Operations for SENS Research Foundation,
says the nonprofit started accepting crypto in late 2015, at the request of
donors. Generally, the organization sells the crypto as soon as it comes in,
converting it to fiat. She notes, “Unfortunately, until our vendors and
grantees accept crypto as a form of payment, conversion to fiat money will be
inevitable for us.”
She says these crypto donations would not have come in otherwise. “I
don’t believe that the majority of our donors could have been convinced to
donate to us in USD, or other fiat currencies. I say this having requested that
of a few donors. Large sums of cryptocurrency are notoriously hard to convert
into USD, and we had our fair share of struggle to find a way to do so in a
timely and responsible fashion.”
The crypto community—while not homogenous—includes a number of people
with a strong libertarian bias that resents or fears unnecessary government
intrusion in markets or in personal affairs. Cryptocurrencies allow for
somewhat more anonymity. This has an interesting impact on nonprofit.
Fabiny says some donors refuse to give their legal names. “We request
some contact information from our crypto donors when they make a donation but,
by and large, we receive bogus information. It’s their right to do so,
but we are obligated by the IRS to make a good faith attempt to learn the
identities of our donors, and so we do, regardless of our success rate.”
Brent Andrewson, an attorney with Kirton McConkie who specializes in
nonprofit law, confirms that there is no liability associated with accepting an
anonymous donation. There are no “know your customer” rules that apply to
nonprofits with respect to their donors. [Disclosure: Kirton McConkie is a
former client.] Failing to provide valid identifying information to a nonprofit
will, however, put the donor at risk of losing the tax deduction.
Furthermore, when nonprofits make grants they face strict rules. “Under
Office of Foreign Asset Control (OFAC) regulations and certain Executive
Orders, stiff sanctions can be imposed on a charity that even inadvertently
supports a sanctioned organization. Therefore, it is imperative that the
charity conduct due diligence and run a risk assessment before making further
grants of funds that come in under questionable circumstance.
In order to accept crypto donations, Wan suggests using a service
like bitpay,
which allows customers to accept Bitcoin and Bitcoin Cash and convert them to
dollars.
Scott suggests using an app like Robinhood that
advertises that it will allow round-the-clock trading of cryptocurrencies
commission free. Once set up, he suggests making potential donors aware by
putting up a notice on your website.
Scott’s company Causecast is developing a simple web widget that will
allow for crypto donations that will automatically be converted into fiat.
However you choose to do it, remember this. The party has already
started. The Pineapple Fund, itself funded anonymously by crypto
donors, has donated $55 million of Bitcoin to charities.