Cryptophilanthropy: how will charity grow through cryptocurrencies?

Cryptocurrencies are now a true global phenomenon. The number of users who own and trade cryptocurrencies is growing, and is estimated to reach 1 billion by the end of 2022.

As the popularity of cryptocurrencies has grown, so has their value. Bitcoin, the most popular cryptocurrency, reached its highest value in 2021, reaching over $66,000.

Despite fluctuations in their value and the risk of volatility, more and more people see cryptocurrencies as the currency of the future. And in some places the use of cryptocurrencies is not the future, but the present.

An example? El Salvador, in Central America, was the first country to make Bitcoin its legal currency, on par with the U.S. dollar. In addition, more and more companies around the world are gearing up to accept Bitcoin and other digital currencies to purchase their products and services.

But the for-profit world will not be the only one to benefit from the mass adoption of cryptocurrencies. Even the nonprofit sector, consisting of NGOs and charitable organizations, can already receive substantial support from the cryptocurrency world and users ready to approach cryptophilanthropy.

The charitable organization Fidelity Charitable conducted a survey to study the popularity of these digital assets today and the possible evolution of philanthropy in the time of cryptocurrencies.

The cryptocurrency scenario today

The survey shows that the popularity of cryptocurrencies is definitely on the rise. Here are some key figures provided by Fidelity Charitable:

  • 13% of investors own cryptocurrencies;
  • Among those who do not own them, 20 percent say they might consider investing in cryptocurrencies in the coming year.

Especially important for the nonprofit world is the target audience of Millennials, who represent the generation most involved in cryptocurrency use and philanthropy:

  • 35% of younger investors own cryptocurrencies;
  • Among those who do not own any, 50% say they will consider investing in cryptocurrencies in the coming year;
  • 47% of Millennials believe that cryptocurrencies are not just a passing fad, but a smart investment;
  • 90% of Millennials also say that charity is an important part of their lives.

The nonprofit sector, therefore, should quickly become able to connect with the Millennials’ generation to intercept new donors more inclined to use blockchain and cryptocurrencies.

The reason why nonprofits should approach the crypto world is also related to the many benefits that these digital assets, along with blockchain technology, can bring to the causes for which these organizations fight.

Among the advantages of cryptocurrency donations, for example, we find greater security of the transaction, greater transparency and the ability to monitor, via the blockchain, how one’s donation is being used by the organization receiving it.

On the other hand, cryptocurrency holders may be encouraged to donate by the tax advantages of donating. However, Fidelity Charitable found that confusion persists with respect to the tax implications of cryptocurrencies. For example, 38% of cryptocurrency holders do not know that selling digital assets is a taxable event.

In fact, donating cryptocurrency is one of the most efficient ways to reduce one’s taxes. For example, in America, cryptocurrency holders who decide to donate will not have to pay capital gains taxes on donated cryptocurrencies.

For these reasons, nonprofits should also make an effort to educate their donor base about the tax benefits of cryptocurrency donations, as well as the significant impact they can bring to the causes and projects run by the organizations themselves.


Donating cryptocurrency to charity

The data speak for themselves: those who own cryptocurrencies are also generally more inclined to donate to charity, partly because of the tax advantages.

For about half of cryptocurrency holders, the value of the average donation in 2020 was about $1,000. The same amount is reached by only 33%  of the general investor population.

Why do investors donate cryptocurrencies?

The motivation behind donating to cryptocurrencies is twofold.

On the one hand, donors feel a desire to contribute to a cause they believe in, generating a concrete and immediate impact.

On the other, the tax benefits of donation are a definite motivating factor. In fact, tax benefits are mentioned by 54% of respondents as one of the reasons why cryptophilanthropists decided to donate.

Cryptocurrency donation: what obstacles?

Although the data suggest that cryptocurrency holders are largely cryptophilanthropic (about one-third of them, in fact, would be interested in donating), there are some obstacles that can get in the way of the donation process.

Identifying these obstacles and defining the best way to overcome them is a key point that nonprofits need to work on in order to reach more donors.

Here are some difficulties mentioned by users involved in Fidelity Charitable’s survey:

  • More than half of cryptocurrency investors do not know that these assets can be donated to charity;
  • 44% of users found difficulties in the user experience of the donation process, finding it too cumbersome and complex;
  • Another frequently reported difficulty is being able to identify nonprofit organizations that accept cryptocurrency as a form of charity.

Implications for the future of the nonprofit sector

Given this data, it is clear that nonprofits have a definite road ahead to connect with these new donors.

Generating a stream of donations in cryptocurrency can be an innovative and impactful means of funding nonprofit projects.

To get there, however, it is important for nonprofits to be able to educate the donors and investors they come in contact with, to be able to answer their questions and concerns, and to know how to incentivize the donation process by removing possible obstacles.

Many nonprofit organizations have already decided to accept cryptocurrencies from their donors. For example, in 2019 UNICEF established its CryptoFund to accept cryptocurrency donations.

As we have seen, an overly cumbersome donation mechanism is among the strongest obstacles that can disincentivize donors. So, making the donation process easy, fast and secure is crucial. For this reason, many organizations rely on services such as The Giving Block, a platform to facilitate the cryptocurrency donation process to nonprofits.

Given the growing popularity of cryptocurrencies, the benefits associated with cryptophilanthropy are also set to grow, involving more and more users and nonprofits.

From increasing the donor base to increasing the value of the crypto market, this world is showing increasing promise for anyone who wants to contribute to the common good through innovative digital assets such as cryptocurrencies and NFTs.

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