Pros and Cons of Accepting Cryptocurrency Donations

This article was originally published on the Soapbox Engage blog. You can read the full article here.

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Most nonprofits choose to participate in the latest fundraising trends to capitalize on donor opportunities and innovative asks. That often includes accepting noncash donations like cryptocurrency. There are plenty of impactful benefits for nonprofits that accept crypto donations, but it can also come with a few challenges.

In this article, we’ll explore the biggest pros and cons of accepting cryptocurrency donations so you can determine if this donation avenue is a good fit for you:

• Pro: Engages High-Capacity Donors
• Con: Cryptocurrency Can Be Volatile
• Pro: Diversifies Your Nonprofit’s Revenue
• Con: Requires Additional Infrastructure
• Pro: Attracts Donors by Embracing Innovation

As we discuss each aspect of cryptocurrency donations in more detail, consider your donors’ giving habits and your nonprofit’s existing resources. If it seems like accepting crypto could be a good decision for you, we’ll let you know what you can do to take the first steps. Let’s get started.

Pro: Engages High-Capacity Donors

One of the biggest benefits of accepting noncash gifts like cryptocurrency or stock donations is the ability for nonprofits to engage donors who have a high capacity to give. By offering more ways to give that are beneficial to potential major donors, you can better engage these influential supporters and earn larger donations to push forward your fundraising goals. 

Why is cryptocurrency a more beneficial way for high-income donors to give? When donating crypto, donors can receive the following benefits:

• Value appreciation: Crypto that appreciates in value often means donors can give larger donations than they would be able to in cash. For example, say that a donor purchased cryptocurrency for $8,000 initially, and over time it became worth $10,000. Now, they can donate an additional $2,000 to your nonprofit on top of what they originally spent on the crypto.
• Offset capital gains tax: If cryptocurrency appreciates in value over time, the owner must normally pay a capital gains tax on the appreciation. By donating their crypto to a charitable organization and reporting the donation to the IRS, however, donors often don’t have to pay this tax.
• Tax deductions for the full market value: Along with avoiding capital gains taxes, donors can get an additional charitable tax dedication for the full market value of the crypto gift.

Over 34 million Americans own cryptocurrency, so it’s likely that many of your existing donors do, too. You can improve these donor relationships just by accepting crypto donations and making them aware of these mutual benefits.

Con: Cryptocurrency Can Be Volatile

Because cryptocurrencies aren’t backed by the government or a centralized financial institution, factors like shifting supply and demand can make the market highly volatile, meaning the value can change on a day-to-day basis. This is a concern for many nonprofits since they don’t want a monetary donation that they can’t easily determine the value of.

Fortunately, there’s an easy solution to this. According to Infinite Giving, your nonprofit can avoid the volatility of the crypto market simply by using a donation platform that immediately converts donated crypto into USD and initiates a cash transfer to your organization’s bank account.

This way, your nonprofit receives the value of the cryptocurrency at the time of donation and avoids any future fluctuation. With a platform like this, your nonprofit doesn’t ever have to hold cryptocurrency directly or worry about it losing value. 

Pro: Diversifies Your Nonprofit’s Revenue

As a nonprofit professional, you know the importance of cultivating a variety of revenue streams so you don’t box yourself into one donation avenue. If one campaign doesn’t reach its goal, you know you can supplement that funding with year-round revenue streams like matching gifts or corporate sponsorships.

By adding cryptocurrency gifts to your nonprofit’s fundraising avenues, you can become less reliant on a single source of funding. Even as you focus on specific fundraising campaigns, you’ll always have the potential for donors to give large cryptocurrency donations in your back pocket.

Plus, accepting cryptocurrency can open the door for additional noncash donation opportunities to further diversify your organization’s revenue. Branch out by accepting donations of stocks, donor-advised fund grants, or micro-endowments. 

Con: Requires Additional Infrastructure

While most nonprofits already have everything they need to accept cash donations, they need to take extra steps to set up the infrastructure to accept cryptocurrency. Specifically, you’ll need:

• A crypto wallet: Crypto wallets allow you to send, receive, and keep your cryptocurrency secure by holding the keys (like passwords) you use to access your crypto. Even if you immediately convert all of your donated crypto into cash, you’ll still need a crypto wallet to receive it initially.

• A way to easily accept donations of cryptocurrency: While you can simply send your donors a link to your crypto wallet and ask them to send funds, most donors expect a more streamlined donation experience. By using a crypto donation platform, you can accept cryptocurrency gifts right from your branded donation page.

This can seem like a lot to set up, but if you work with the right partner, they can handle all of the hard work for you.

By partnering with a crypto donation platform provider with a fiduciary responsibility to act in your best interest (like Infinite Giving) your staff won’t have to worry about setting up this infrastructure on your own. The right partner will take care of opening your crypto wallet, liquidating crypto donations, sending donation receipts, and helping you understand the financial side of accepting crypto.

Pro: Attracts Donors by Embracing Innovation

Finally, accepting new types of donations like cryptocurrency can help your organization gain a reputation as a future-minded nonprofit that embraces innovation. You’ll align with the interests of modern, tech-savvy donors and could potentially attract brand-new supporters by embracing the future.

Once you start accepting crypto donations, you can increase brand awareness and positive public perception by creating a marketing campaign to promote the option. Getting Attention recommends the following marketing ideas to get the word out about your new donation opportunity: 

• Blog posts on your website: Write a post on your nonprofit’s blog that discusses the benefits of donating cryptocurrency. You might also explore why looking to the future of new technologies aligns with your mission.
• Text marketing: Let your existing supporters know that you now accept crypto donations with a quick text. For an additional engagement opportunity, send a link to your blog post, too.
• Cohesive social media posts: Create a few branded social media graphics or videos about the option to donate cryptocurrency and post them across your social media channels. 

As you promote the option, don’t forget to highlight the tax benefits your supporters can receive by donating their crypto.

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