Cryptocurrency donations
With the skyrocketing donations being made in cryptocurrencies and the increasing amount of new fundraising solutions introducing crypto, many NGOs are wondering if they should include this currency in their donation options. In this article we will give you more light on cryptocurrency donations and why it’s worth to consider this solution.
What is cryptocurrency?
Cryptocurrency is a digital asset that functions like a regular currency. The difference is that the currency is generated by code and is not regulated by the authority, but maintained by decentralised computers’ network. The transactions in cryptocurrencies can be handled peer to peer instead of going to a bank, and are recorded on the blockchain.
Why is it worth accepting cryptocurrency donations?
In recent years cryptocurrencies became the fastest growing assets on the market and the crypto donations were already called a future of fundraising. In 2021, the annual volume of crypto donations jumped over 500% compared to the year before, with almost 70 million USD being donated. Cryptocurrency owners tend to be highly generous with their donations, in 2020 45% donors gave more than $1.000. This might be a result of the fact that cryptocurrencies are considered a property, hence donating them it’s a nontaxable event, many of the crypto donors mention this as one of their main motivators to donate. However, a lot of the donors complain that it is difficult to find charities that accept this currency. With so many advantages of crypto donations it is a big opportunity for the NGOs to consider this solution.
How to accept cryptocurrency donations?
Accepting cryptocurrency donations might at first seem like a complicated process, however nowadays there are several ways to accept digital assets as donations without complexity.
The first option is setting up a charity’s digital wallet. The two most popular solutions are hosted wallets and self custody wallets. Hosted wallet is easier to set up, you only need to pick a platform that you trust, create your account and buy or transfer crypto, additionally a third party will keep your digital assets for you. Self custody wallets require more steps while setting up. After choosing a reliable platform you have to download the wallet app, create an account and a private key and then transfer crypto to your wallet. Bear in mind that unlike hosted wallets, the self custody ones only provide the software to store your digital assets and are not responsible for safeguarding your password, hence if the password is lost you will lose access to your wallet. Digital wallets generally give you more freedom and allow you to omit the additional platform fees that occur when using a third party processor. However, if the donor sets up a wallet for the charity and still holds a key to it, it might not be considered as a donation.
Tip: When choosing the platform on which you want to set up your digital wallet, focus on the security, ease of use and the compliance with government and financial regulations.
The second option is accepting cryptocurrency donations through a third party processor. There are plenty of payment processors specialised in cryptocurrency on the market right now. The platforms are providing automated receipts and conversion to cash, some will allow you to hold onto cryptocurrency as investment. The fees for transactions and the platforms vary depending on the processor you are using, however they tend to not exceed 5%.
We are currently in the process of developing an affordable platform that will make accepting cryptocurrency donations an easy experience for you. If you wish to hear more about it, don’t hesitate to contact us on info@rainbowriders.dk
We hope that this article dispelled your doubts and answered your questions about crypto donations!