Cryptocurrency Donations Have ‘Notable Impact’ at Nonprofits, but NAO Urges Caution
- Written by Sander Gusinow
- Published in Nonprofit
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Cryptocurrency donation platforms are helping connect donors with nonprofits, but the environmental impact of non-fungible tokens have turned some donors off.
Portland Rescue Mission has been accepting donations of cryptocurrency since February, a decision marketing director Mike Deckon says has already begun to reap rewards for the nonprofit.
“While we are still in our first year of receiving donations of cryptocurrency, the impact has been notable,” Deckon writes in an email to Oregon Business. “While the quantity of gifts is just starting to ramp up, the gifts of cryptocurrency that we’ve received have been very generous. This is especially appreciated given the steady increase in need that we’ve experienced in our community.”
In 2021, Bill Meadowcroft, the organization’s chief operating officer, was introduced to the concept of crypto-giving at a seminar hosted by the Evangelical Council for Financial Accountability and featuring a presentation by the cryptocurrency donation platform Engiven.
When Portland Rescue Mission began accepting non-fungible tokens (NFTs) in February, the only nonprofit Deckon knew of that accepted such donations was the Salvation Army, which began accepting crypto donations in December of 2021.
The presentation by Engiven was enough to convince the organization it was time to board the crypto bandwagon. Deckon writes Portland’s propensity for innovation in the tech and blockchain space made the prospect more attractive.
“We always knew, with the growth of cryptocurrency and all the attention that it was getting, that it was a matter of when, not if. With Portland’s enthusiasm for new ideas and new technology, we were excited to introduce this giving platform as soon as possible,” Deckon writes.
All-time crypto giving was estimated at roughly $200 million in 2019, according to charity foundation Giving Tuesday. Last year, crypto donations to charity increased over 1000% at Fidelity Charitable investors, according to a report from Money.com.
It’s not clear how many Oregon nonprofits accept crypto donations, according to Kirsten Saladow, director of membership communications and advancement at the Nonprofit Association of Oregon. But she suspects the numbers are going up.
According to Saladow, members started asking her about cryptocurrency in early 2021.
Currently, the IRS treats donations of cryptocurrency similarly to gifts of stock: digital money is considered property and donating it is a nontaxable event. This means donors could deduct up to the fair market value of the donated asset when they file their taxes. Cryptocurrency enthusiasts also argue it’s the most secure way to give, because crypto donations are tracked and stored using Blockchain technology.
While buying and storing cryptocurrency is one side of the equation, getting crypto back into spendable funds is another challenge. Portland Rescue Mission immediately converts every gift into US dollars, with Engiven taking 4% of each donation. It means the charity can use the funds immediately, and is therefore not affected by the high market volatility and risk associated with crypto ownership.
“There is a risk when accepting crypto donation. The value of the asset fluctuates, but there are similar risks in accepting donations of stock as well,” says Saladow. “One thing that I always tell nonprofits looking into accepting crypto is to make sure they're working with their CFO and their auditor, because there are financial rules around accepting cryptocurrency are still clarifying.”
Saladow says larger nonprofits able to track and monitor cryptocurrencies may have an easier time accepting, tracking and protecting the asset than smaller organizations.
Smaller and midsize nonprofits may not have the resources and personnel to keep track of the changing rules and markets surrounding non-fungible tokens.
“The organizational risks of crypto are similar to the personal risks of crypto. If you have one person that has the password and they lose it, you might never be able to find it again. And in the way that nonprofits are audited, what is most important is working with your auditor and making sure you're in compliance,” says Saladow. “The rules on crypto aren’t always clear, so you can't always know if you're in compliance or not. It’s just something nonprofits have to of pay attention to as they move forward. For a lot of nonprofits, crypto is still uncharted territory.”
Saladow also notes it’s difficult to predict what, if any, rules financial regulating bodies will place on crypto in the coming years.
For some nonprofits, buying and storing cryptocurrency runs counter to the mission. “Mining” for cryptocurrency — the process by which the tokens are generated and audited — requires the use of enormously powerful computers solving complex equations.
According to the Bitcoin Energy Consumption Index, mining for Bitcoin, the most popular cryptocurrency, consumed an estimated 131.26 terawatt-hours this year — almost as much electricity as the entire country of Argentina. The study found that if crypto mining were a country, it would be in the top 30 energy consumers.
Columbia Riverkeeper began accepting cryptocurrency in 2021, but executive director Lauren Goldberg, executive director of Columbia Riverkeeper, tells Oregon Business says crypto is “not a large, or even a small source of funding” for the organization.
"We've seen minimal interest from donors in cryptocurrency-based donations,” says Goldberg. “This isn't surprising as more and more information emerges on the climate impacts of crypto."
While the option to donate crypto is still available on the company’s website, Goldberg says Columbia Riverkeeper would evaluate any further donations of crypto on a “case-by-case basis.”
Saladow likened cryptocurrency to having oil companies in a nonprofit’s stock portfolio.
“I know that some of our environmental nonprofits won't accept crypto for the same reason they wouldn't accept stock in certain energy companies,” says Saladow. “From a mission standpoint, it comes down to what you're willing to accept.”
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