Should We Accept Cryptocurrency Gifts?
According to Yahoo Finance, over 21 million or 14% of Americans own some form of the 10,000 virtual currencies available, such as Bitcoin or Ethereum. These crypto assets or digital currencies are growing in popularity, with another 20 million individuals considering the purchase of cryptocurrency in the next year. As a new source of wealth for many Americans, should your organization consider accepting gifts of cryptocurrency?
The IRS classifies cryptocurrency as property or an appreciated asset. By donating cryptocurrency, an individual may avoid capital gains tax and receive a deduction from their income taxes, according to Fidelity. This may lend a donor the ability to make a larger gift to charity than if the gift were made in cash.
Here are some things to implement before your organization should consider accepting gifts of cryptocurrency.
Establish a gift acceptance policy, procedures and process for accepting cryptocurrency for your organization. Who in your organization will be involved in deciding to accept a crypto asset? Should your organization purchase cryptocurrency as part of your investment portfolio? Will your organization keep or sell the cryptocurrency upon receipt? As with gifts of stock, some nonprofits may either choose to hold onto the cryptocurrency or cash it out upon receipt. FreeWill advises that selling the cryptocurrency right away may be less risky as crypto values can fluctuate even within a day. Online currency converters, such as CoinMarketCap https://coinmarketcap.com/converter, will help you determine the value of a gifted crypto asset.
Select a cryptocurrency platform. A cryptocurrency platform allows you to accept cryptocurrency donations and automatically convert to U.S. dollars. To do so, you’ll need to set up an account for your nonprofit with a crypto payment processor such as Coinbase or BitPay.
Market to your audience. Individuals that possess cryptocurrency are digitally fluent and often spend time on social media platforms. Crypto donors are younger and more likely to donate online or through a link rather than respond to a direct mail piece or phone call. To market your cryptocurrency program, create a link on your website for donors to easily donate.
Determine receipt and acknowledgement. Perhaps one of the things that makes donating cryptocurrency appealing is the ability for the donor to be anonymous. This is not always helpful for the organization to acknowledge and extend a receipt for the gift. When adding a link to your website for the donation of cryptocurrency, use an online form to collect the donors’ contact information and allow you to properly acknowledge and steward the donor for their gift.