The rise in the frequency of cryptocurrency donations suggests this type of donation will have a lasting effect and potentially transform philanthropy.
Soaring Cryptocurrency Donations
Last year was by far the largest year for cryptocurrency donations. Many international charities have already started accepting cryptocurrency donations.
On average, the crypto user base is much younger than traditional charitable donors. Cryptocurrencies are attracting large numbers of young people to philanthropy. Instead of choosing a specific nonprofit, donors can support a specific cause.
Lower Transaction Costs
Crypto investors can avoid capital gains tax by donating. Donors and nonprofits can save on transaction fees that exist in traditional financial services platforms.
Also, there are other blockchains with lower fees. Transaction times for cryptocurrencies can be as low as seconds or minutes, compared to hours or even days for cross-border transfers.
Attractive Tax Cuts
In some countries, donations of cryptocurrency to nonprofits are tax deductible. However, converting cryptocurrencies to fiat may trigger capital gains taxes.
By directly donating long-term appreciating assets, investors can deduct the fair market value of cryptocurrencies at the time of donation.
Protect Donor Anonymity
Nonprofits find it easier to target existing donors than to find new ones. So, as the pressure to donate increases, donors tend to prefer anonymity.
Giving in cryptocurrency helps the donor remain anonymous, even when giving away millions. However, this anonymity may not last long as many countries increase their cryptocurrency regulations.
