Crypto donations: What nonprofits need to know

Nonprofits know how important it is to meet donors where they're at and offer a variety of convenient payment methods. But with cryptocurrencies rising in popularity, many organizations wonder if they should also start accepting crypto donations. 

We've got the answers to many of the questions charitable organizations are asking about accepting crypto donations, including:

• What crypto donations are
• Who should accept crypto donations
• Why it's okay for your nonprofit to sit this trend out
• What nonprofits should be prioritizing instead

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What is a crypto donation? 

Crypto donations are exactly what they sound like—charitable giving via cryptocurrency. Cryptocurrency, commonly referred to as crypto, is a digital form of money that operates through software-based ledgers called blockchains. 

Blockchains record and confirm all transactions, and each contain a limited number of monetary units called coins—the value of which fluctuate based on supply and demand. You've probably heard of the original Bitcoin, but there are now tons of cryptocurrencies and blockchains, including Etherium, Solana, and Dogecoin.

Think of receiving crypto donations like a gift of stocks and bonds. You can buy, sell, trade, or hold onto cryptocurrency as an investment. But unlike other forms of currency, there is no single entity in charge of crypto—no bank, no FDIC, and no ties to a particular country. Instead, online exchanges enable you to track, trade, invest your coins, or convert them immediately into US dollars to put toward your mission. 

Should you accept crypto donations?

Since 2018, when the Pineapple Fund gave away Bitcoin grants valued at $55 million to 50 nonprofits, more people have been looking to donate crypto to their favorite charities. In fact, crypto donations going into Fidelity Charity donor-advised funds doubled from $13 million in 2019 to $28 million in 2020. By November 2021, that number had skyrocketed to $158 million. 

Many platforms enable nonprofits to accept crypto donations and connect them with the crypto community to streamline the process (like The Giving Block, Endaoment, Fidelity Charitable, and Every.org, to name a few). Most even give you the option to cash out immediately. Regulated exchanges like Coinbase and Gemini can also help nonprofits accept cryptocurrency safely and compliantly.

However, crypto donations are still not a good fit for every nonprofit. Organizations curious about crypto should consider the pros and cons before spending their time and energy going down this path. 

Pros

• 💸 Tax incentives for donors: Donors who give crypto will be exempt from capital gains tax and may also receive a federal tax deduction against their income tax for the total value of the donation.
• 🤝 Fast and transparent payments: Because cryptocurrency is encrypted and authenticated, transactions made via crypto are super secure.
• 🤩 No payment processing fees: Nonprofits can save money by avoiding the fees incurred by credit and debit card processing platforms and other transaction costs. 
• 🌍 Easier international donations: With no exchange fees, crypto donations allow anyone worldwide to give without traditional regulatory processes or interference from banks.
• 🚀 An opportunity to tap into a fast-growing asset: Accepting donations via crypto can open the door to audiences and potential donors with whom you'd otherwise not have the chance to connect with.   

Cons

• 📉 The market is incredibly volatile: If you wait to convert your crypto to cash, its value could go up or down without much warning. Roh recommends liquidating any donations of cryptocurrency immediately into US dollars. If you want to hold onto the cryptocurrency long term, then "you should make yourself an expert," she warns. 
• 👤 Crypto is anonymous: People can donate crypto without attaching their names or providing contact information, which makes it difficult to issue tax receipts and steward donors.  
• 🥵 Certain blockchains are notoriously harmful to the environment: Accepting crypto that has a hefty carbon footprint, like Ethereum and Bitcoin, may go against your organization's mission and damage its reputation and credibility. 
• 🤟 Crypto might not be relevant to your donor base: According to Pew Research, only 16% of the US population currently uses crypto, the majority of whom are males between the ages of 25 and 44, meaning millennials and Gen Z make up most of the market. 

Most nonprofits do not need to bother with crypto

Although a great deal of wealth exists in crypto for nonprofits to tap into, the volatility of this market, combined with its relatively limited donor base, does not make it worthwhile for most organizations. 

Things may change with time, but at this point, we recommend saving the hours in your day to focus on other, tried-and-true fundraising best practices. 

If you're still gung-ho about crypto, here's what to keep in mind

Before accepting crypto, ensure it aligns with your mission and donor base. If you want to start accepting crypto donations, make sure to put policies in place for how and when you will liquidate crypto donations. 

Take time to understand important regulations and relevant tax laws, and choose a platform to process the transactions carefully before assuming any risk. 

Here are a few questions that can help you as you are evaluating platforms and choosing a service to process crypto donations:

• Does the platform assume the legal risks involved, or does the charity?
• Are there any set-up, transaction, or brokerage fees?
• Does the platform have the capability to embed a crypto donation widget onto your website?
• Does your organization take custody of cash or crypto in a digital wallet?

Crypto or not—ALL organizations should be doing this one thing 

Crypto is not right for every organization. However, there is one thing all nonprofits should do: Optimize their donation platform. This means offering a variety of convenient payment methods and ensuring secure payment processing for your donors. 

Givebutter provides a quick and easy way for donors to give any way they like (cash or card, Google and Apple Pay, ACH, PayPal, even Venmo) in one streamlined place. The best part? It's free—no subscriptions or platform fees, thanks to our transparent tip-or-fee model. 

When you have a landing page that your supporters can trust and streamlined payment options that serve diverse groups of people, you will be living in the future of online fundraising—without the need for a whole new world that is cryptocurrency. 

‍Sign up for a free account today and start raising money for your mission in minutes.