101: Nonprofit cryptocurrency donations
So, you’re a nonprofit that just started fundraising cryptocurrency. Or maybe you’re just looking into it—perhaps as a means of diversifying revenue due to the coronavirus (COVID-19). Whether you’ve already started or are interested in getting started with cryptocurrency, here’s what you need to know.
- What is cryptocurrency?
Merriam-Webster defines cryptocurrency as “any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.”
- Why do people donate cryptocurrency?
Cryptocurrencies like Bitcoin are classified as property by the IRS. Donors who give cryptocurrency to a 501(c)(3) nonprofit pay no capital gains taxes on the appreciated assets. In other words, cryptocurrency is often a smart way for your donors to give.
- How many people use cryptocurrency? Who are they?
The largest cryptocurrency exchange in the United States has about 35,000,000 users. To put that number in context, that is more people than users of Fidelity, Charles Schwab, and E*TRADE combined. Cryptocurrency users tend to be Millennials or Gen Z donors who are active online.
- How much cryptocurrency has been donated?
Hundreds of millions of dollars are donated in cryptocurrency each year. Nonprofits raised more from the Pineapple Fund’s Bitcoin grants than all of Twitch’s 2019 fundraisers. “Donate Bitcoin” has been Googled more than “Donate Stocks” in the last five years.
- Is it hard to accept cryptocurrency donations?
Not anymore. In recent years, it’s become about as easy as getting set up to accept stocks. Make sure you select the best option for your organization, but, once you do, your account can be open in a couple of days.
How to accept Bitcoin and other cryptocurrency donations
Any nonprofit can accept cryptocurrency donations today. The first decision you’ll have to make is if you’ll want to figure out and implement a solution on your own. This can be a feasible option for nonprofits that have someone in house who knows cryptocurrency from front to back. For everyone else, here are the features your organizations should consider as you look for the best option.
- U.S. dollar offramp: The “USD” part is really important. There are options online that advertise automatic conversion, but this is only available for converting into other cryptocurrencies. Make sure you select an option that allows you to sell the cryptocurrency for cash.
- Automatic conversion: Most cryptocurrency accounts don’t provide you with an option to automatically convert donations from cryptocurrency. Avoid them, because the donations you receive will go up and down in value.
- Donor interface: This is nothing new. If your process is difficult for donors, they’re far less likely to give. The Yang presidential campaign is a perfect example. The campaign allowed donors to give cryptocurrency, but it required an arduous form followed by a phone call. Look for options with a widget that you can customize to your KYC (know your customer, i.e., customer verification) requirements.
- Setup/support: You wouldn’t put your money in a bank without having someone there you can contact if you run into an issue. Cryptocurrency is no different. Make sure you have a customer service point of contact before you put a cryptocurrency option on your site. The last thing you want is for a donation to get blocked or directed to the wrong place.
How to fundraise cryptocurrencies
This is an important piece that often gets left out of the conversation when nonprofits explore cryptocurrency. It’s important to address cryptocurrency donors as a new and younger donor base, and to meet them where they are. Here are the main fundraising considerations to address once you’re set up to accept cryptocurrency donations.
- Partners, partners, partners: If you’ve ever attempted to get in front of a new donor base, you’ve probably leveraged key opinion leaders and corporate partners who have the ear of that audience. Do the same with cryptocurrency. Reach out to the people who matter to this audience, and look for sponsorships from industry leaders.
- Campaigns: At some point, it would be advisable to conduct a campaign specifically focused on cryptocurrency donations. It can be as simple as a day of social media messaging around the fact that you accept cryptocurrency, and why it matters.
- Media: When you announce that you’re accepting cryptocurrency, or when a big donation comes in, share this news with media outlets in the cryptocurrency ecosystem. They’ll often be excited to tell your story.
- Tack on cryptocurrency messaging: In your social media communications throughout the year, make sure to tack on a sentence or two around the fact that you accept cryptocurrency. “Hey, please donate to our organization today. And in case you forgot, we accept [type of cryptocurrency] too!” Integrating this message consistently is the best way to get found by donors.
Those are the basics! If you’d like to learn more about accepting cryptocurrency, you can reach out to us at The Giving Block for educational materials or to talk through your questions.