Crypto Currency and Fundraising

Alden F. Briscoe, MAT

Your editor recently attended an AFP-sponsored Zoom presentation on crypto currency and fundraising. The presentation was given by Patrick Schmitt, who is a former fundraising manager for Barack Obama and a founder and head of FreeWill, a firm which consults on fundraising technology. Their website says, “We build technology to make the most impactful gifts easier for supporters to give and simpler for organizations to receive.” FreeWill claims to have 175 employees and to have helped nonprofits raise $5 billion. In the presentation Mr. Schmitt made five key points about crypto currency and fundraising.

1) What is crypto currency?

Mr. Schmitt says crypto currencies are like any other currency. Like gold or a dollar or a peso or a Euro, crypto has value because people think it has value. Like other currencies people can use it or invest in it. He suggests that to raise money in crypto, you don’t need to be an expert but you do need to know some basic stuff. Crypto currencies do not rely on banks or other entities. They use a “software-based ledger” of transactions to record and confirm transactions. Most crypto currencies make their transactions public though not necessarily the sender and receiver of the transaction. Crypto currencies have a short history. In 2008 Satoshi Nakamoto published an article on Bitcoin; in 2009 the first bitcoin transfer took place; in 2011 Namecoin, Swiftcoin, and Litecoin were created; in 2014 Microsoft allowed people to use crypto to buy games; in 2016 Uber accepted crypto currency for the first time; in 2017 Japan accepted Bitcoin as legal payment; in 2018 the crypto market crashed from a value of $824 billion to $186 billion; in 2021 the value of crypto currency had risen to $3 trillion; in 2022 Goldman Sachs became the first major US bank to trade Bitcoin over the counter; in 2021 the number of cryptocurrencies doubled from about 8,000 to more than 16,000.

2) Trends in crypto donations

Many people are investing in crypto. A recent Pew Research Center survey showed that 16% of US adults have invested, traded, or used crypto. That’s about 41 million Americans. More than half of Americans who own crypto, bought it for the first time in the last two years. Another 22% say they are likely to buy it within the next year. Crypto seems to be getting popular because it’s exciting, fees for international transactions are low, there is no governmental control, and investors see it as an asset like stocks. Crypto donations surpassed $500 million in 2021. (Fidelity Charitable alone receive $331 million in crypto last year, a 12 time increase from the prior year.) Crypto owners are more generous than the average investor. (45% of crypto investors gave more than $1,000 to charity in 2020 vs 33% of all investors. As crypto values increase (like stocks) that leads to more wealth, but also more wealth means more taxes if the owner cashes out so giving in crypto means you don’t pay capital gains taxes.

3) Who owns and donates crypto?

Crypto owners are more likely to be young, wealthy, and male. 43% of men between 18 and 29 have bought or used crypto compared to 19% of women of that age, but there is a rise in female crypto ownership. Crypto owners are very diverse with young, Asian, Black, and Hispanic adults more likely than White adults to say they’ve used or invested in crypto. The average age of crypto owners is 38, and 77% are under 45; 74% are men, but 53% of people who are interested in buying crypto are women. More than half live in urban and suburban areas; and their average income is $111,000. 3 30% of people who own crypto are under 30 and 77% of crypto owners are under 45. The top cities for crypto ownership starting with the highest are San Francisco, New York, Los Angles, Chicago, Brooklyn, Seattle, San Jose, Houston, Austin, and Atlanta. Crypto donors are a new source of donors. Many of these potential donors have few other assets. 46% of crypto owners who did give crypto said it was difficult to find charities that accepted crypto. In the US there are more than 600,000 millennial millionaires. 87% of them own crypto. For many, crypto is their biggest source of wealth. Because it’s new, 55% said they didn’t know they could donate crypto. FreeWill has seen the average crypto donation of nonprofits with who they work to be $2,400. The largest donation has been $110,000.

4) How to be successful with crypto donations

  • Have it on your website as an option for giving
  • Make sure it’s easy to give via crypto on the website
  • Because crypto is so volatile, sell a crypto donation immediately
  • Train your staff to accept crypto donations and let their contacts know that you accept crypto
  • Capture the donor’s contact information when he/she makes a gift

Crypto giving will be a small percentage of donations initially but it will grow. You can set up your own “wallet” so you can liquidate crypto gifts yourself, but there are consultants (like Crypto for Charity by FreeWill) who can do that for you. (Note that Bitcoin for example has frequently had value drops of more than 15%.) Note that if crypto donors can’t give on your site, they are likely to just go elsewhere and make their gift.

5) Legal Issues

The laws for crypto aren’t different from other laws, but keep in mind that if you receive a gift of donated property (such as crypto) and you sell it within three years, you must file a Form 8282 with the IRS within 125 days of sale. This is true of real property as well as crypto.