Digital currencies have opened new opportunities to raise funds for charities and Not For Profit (NFP) organizations.
In the past, charity contributions were limited to financial donations, the recycling of used goods, and acts of service. With digital currencies, donors can now donate their coins and unused computing power.
Donors range from large philanthropic projects, prominent individuals in the blockchain sector, small-scale retail investors, to everyday gamers who can mine using existing hardware. Digital currency donations and computing power have together raised millions of dollars for prominent organizations such as The Red Cross, UNICEF, the Open Medicine Foundation, and SENS Research Foundation.
The sudden shift and increase in digital currency donations are a result of its great tax benefits. “People are getting smarter about donating appreciated assets and Bitcoin is the epitome of appreciated assets this year,” said Matt Nash, Fidelity Charitable SVP of donor engagement, to CNBC.
Digital currency donations
Over the past few years, digital currencies have contributed significantly to the social sector through charitable donations. According to CNBC, Fidelity Charity raised over $22 million in Bitcoin in 2017. Other foundations have therefore leveraged the growing popularity of digital currencies. The Red Cross, United Way, Greenpeace, and Save the Children are now accepting Bitcoin donations, which they can later exchange for traditional currency.
Bitcoin’s rise in value has also led to large anonymous philanthropic projects. A great example is the Pineapple Fund; they aim to donate $86 million Bitcoin. They’ve currently donated over $35 million to 42 organizations, including most recently the Open Medicine Foundation.
Prominent individuals in the blockchain space have also made large charitable donations. Vitalik Buterin, the founder of the Ethereum network, recently donated $2.4 million in Ether to Silicon Valley not for profit SENS Research Foundation (SRF).
“Diseases of ageing [are] one of the greatest problems facing humanity [and it] is very much in line with my goal to positively impact the lives of millions of people around the world,” said Buterin.
Tax benefits of donating digital currency
The surge in Bitcoin donations, especially from retail investors, can be linked to its promising tax benefits. Digital currency investors can avoid some of the steep capital gains taxes and collect a charitable contribution deduction instead.
“Cryptocurrency is still what we’d call a niche donation,” said Nash. “These are people who have significant means and are using it as part of their portfolio investment strategy. Assets that have increased in value are good for donating to a donor-advised fund.”
Mining for charities
For those with unused computing power, they can also contribute by mining digital currencies. There are several online decentralized communities such as Charity Mine and Mining for Humanity that welcome individuals to donate unused computing power. Users can, therefore, contribute without any direct donation.
Global children’s aid charity UNICEF recently launched a mining program called Game Chaingers, showing how charities themselves are getting in on the digital currency game. Game Chaingers is the first fundraiser that uses the blockchain to help Syrian Children. It encourages gamers that use high-level graphics cards to turn the cards into miners. They’ve raised over €10,000 Euros (approximately $15,000 CAD) with over 471 contributors.
Despite the negative associations of Bitcoin and the black market, digital currencies open new fundraising opportunities for charities and NFPs.
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