When you hear the term “cryptocurrency,” there’s a good chance confusion sets in. You may be skeptical about its viability, or may just have a lack of understanding of how it works.
Either way, there is one thing to know for certain: there is a lot of value in accepting cryptocurrency for your organization. The entirety of the cryptocurrency market is worth over $3 trillion as of November 2021, its highest mark ever.1 You may not need to fully understand how cryptocurrency works, but you should know that your donors have crypto on hand, and are willing to donate it.
A Pew Research Center survey in November 2021 states that 16% of U.S. adults have either invested in or traded crypto – this is up from just 1% in 2015.2 As that percentage continues to rise, so does your opportunity to accept these valuable donations.
A Short History
The foundational idea behind cryptocurrency first came about in the 1980s. Its concept was to create “digital money” and put the power of transactions into the hands of the consumer and produce a wider breadth of security, ultimately removing any centralized governing body. A few different variations of the idea sprung up in the 90s, but it wasn’t until 2009 when cryptocurrency as we know it was first introduced.
Bitcoin is credited as being the first form of modern cryptocurrency. It took a couple years for Bitcoin to gain traction, but it soon caught the attention of investors and individuals alike. As well, multiple other forms of crypto like Namecoin, Litecoin, and Ethereum soon emerged. Today, there are nearly 8,000 cryptocurrencies worldwide, each with its own name, use, and value.
The Benefit of Cryptocurrency Donations
Simply put, think of cryptocurrency donations as another form of noncash giving that includes the same benefits as stock giving. Since 2014, the IRS has considered cryptocurrency (virtual currency in IRS terms) as property and should be reported on all tax returns. There are no other special tax rules applied to crypto, so it is treated the same as any other form of taxable capital asset.
Much like stock donations, the same benefits apply to cryptocurrency for tax deductions. When a donor gives stock to your nonprofit, they do not have to pay any capital gains tax on the appreciated value, and neither do you. You simply accept the fair market value of the stock and add the funds into your organization.
It works the exact same way for crypto – for both yourself and the donor. Like with any noncash deduction, the donor simply needs to fill out Form 8283 for their tax returns. It really is that simple.
How to Accept Cryptocurrency for Your Organization
It’s one thing to dive into how cryptocurrency works. It’s another to learn how to accept it as a donation. This is why iDonate makes it easy and handles all the work.
On your end, be sure you can accept noncash donations on the backend of your giving form. There, the donor will select “Other” as the donation type. On the form, the donor will fill out the description (e.g. Bitcoin), quantity (how much of the cryptocurrency they are donating), and any other additional information.
Once finished, the donor will receive an email that includes a Bitpay link. From there, the donor will then complete the Bitpay process like normal. When the transaction has been fully completed, the funds will be sent directly to your organization.
Again, it really is that simple. It is understandable to be apprehensive about something as new and complex as cryptocurrency, but for your organization, there is very little work needed in order to get started.
Let Your Donors Know
Once you have the ability to accept cryptocurrency, now you should let your donors know the good news. As year-end giving wraps up and you start looking toward campaigns for the new year, be sure to let your donors know about cryptocurrency donations. This can easily be done through social media, but adding additional content to your site and landing pages about what you can accept is a great way to let donors know about crypto donations. At the same time, let them know the process of what they can expect when they look to donate on your site.
Remember, the same tax rules apply for crypto as it does for stocks or any other capital asset. This is an important factor to know for donors if they are unaware of how cryptocurrency works for tax purposes.
Giving your donor base multiple options of donations can be an important step in widening your organization’s mission. It does not take much to incorporate, and the return will be worth it.