By Doug Sandor, Senior Accountant and Chad Nieter, CPA, Senior Manager at Blue & Co.
Cryptocurrency, a digital asset powered by cryptography for enhanced security, has revolutionized modern finance and charitable giving. Since the creation of Bitcoin in 2009, the landscape of digital currency has expanded, offering innovative ways for not-for-profit organizations to accept donations. By incorporating cryptocurrency into their donation strategies, not-for-profits can tap into a growing community of tech-savvy donors and embrace transparent and efficient transactions.
Factors for Not-For-Profits Who Accept Cryptocurrency Donations
- Increased Contributions: Accepting cryptocurrency can attract tech-savvy donors who prefer to give in digital formats. This can lead to larger donations, as cryptocurrency holders may be more inclined to contribute significant amounts compared to traditional cash donations.
- Lower Transaction Fees: Cryptocurrencies operate on decentralized networks, allowing for peer-to-peer transactions without intermediaries like banks. This can reduce transaction fees and increase the speed of donations.
- Tax Benefits: Donating cryptocurrency is not a taxable event for the IRS, meaning donors don’t have to recognize any capital gains on the appreciated asset. This can encourage more significant donations since donors can contribute the full amount without incurring capital gains tax.
- Enhanced Reputation: By accepting cryptocurrency, not-for-profits can enhance their reputation as innovative and forward-thinking organizations. This can attract younger donors who are more likely to engage with organizations that embrace new technologies.
- Transparency and Security: Blockchain technology, which underpins cryptocurrencies, offers transparency and security. Donors can track their contributions and see how funds are utilized, building trust with the organization.
- Simplified Acceptance: Not-for-profits can use intermediaries to accept cryptocurrency donations without additional legal or accounting burdens. These intermediaries handle the tax receipts and conversion, then grant out to organizations in cash.
Overall, cryptocurrency presents a new frontier in fundraising and donor engagement for not-for-profits, offering numerous benefits that can help them thrive in an increasingly digital world.
How to Set Up Cryptocurrency Donations for Your Not-For-Profit Organization
Setting up cryptocurrency donations for your not-for-profit organization can be a great way to attract new donors and streamline contributions. The ability to accept cryptocurrency contributions could be a competitive advantage for soliciting contributions. Here are some steps to get started:
- Choose a Payment Processor: Select a reliable payment processor that specializes in cryptocurrency transactions. Some popular options include BitPay, Coinbase Commerce, and The Giving Block. These platforms can help you accept and manage crypto donations easily.
- Create a Crypto Wallet: Set up a cryptocurrency wallet to receive donations. This wallet will store the digital assets securely. Many payment processors offer integrated wallets, or you can use standalone wallets like MetaMask or Trust Wallet.
- Update Your Website: Add a cryptocurrency donation option to your website. Include clear instructions for donors on how to contribute using cryptocurrencies. You can also display QR codes for easy scanning and donation.
- Promote Your New Donation Method: Inform your existing and potential donors about the new cryptocurrency donation option. Use social media, email newsletters, and your website to spread the word.
- Set Policies and Procedures: Establish internal policies for accepting and managing cryptocurrency donations. This includes deciding whether to hold or convert the crypto to fiat currency immediately, and how to handle the accounting and tax implications.
- Provide Tax Receipts: Ensure you can provide tax receipts for cryptocurrency donations. Many payment processors offer automated receipt generation, making it easier for you to comply with tax regulations.
Setting up cryptocurrency donations may be a great way to grow your not-for-profit’s reach and connect with new donors. These steps will guide you through the process of getting started. If you have any questions or need a helping hand, contact your local Blue & Co. advisor.
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