Digital Asset Outlook 2022
Bonus. Crypto-Philanthropy
13.2 Crypto-philanthropy – Key considerations for donors and non-profits Before deciding on donations, donors need to make some considerations properly. These include taxation, suitability, privacy and transparency. Similar considerations apply to charitable organizations.
Figure 122. Crypto-philanthropy – Key considerations for donors and non-profits Considerations
Detail
Trend
Best practice
Taxation
Donors do not have to pay capital gains tax by donating cryptocurrencies. They could also receive a charitable deduction for the full value of the appreciated virtual currency up to a percentage cap of adjusted gross income.
More owners of virtual currencies consider cryptophilanthropy during periods of significant appreciation.
Donate virtual assets that have benefitted from longterm capital gain during the holding period.
Charities have to manage the suitability of the donations, including applicable laws, permissibility and disclosure of financial situation.
Charities are responsible for evaluating permissibility and whether to accept direct donations.
Perform evaluations and streamline the administration process by hosting donor-advised funds (DAFs) to accept virtual currencies donations.
Costeffectiveness
Accepting cryptocurrency donations could potentially save a lot of money for non-profits as some of the value could go to middlemen organizations, such as credit card companies or donation platforms that charge fees
Cryptocurrency transactions are of low cost and growing popularity. This would ensure that most of your donation goes directly to the charity.
Accept crypto donations directly from donors with any middlemen.
Privacy
Some donors may prefer to maintain anonymous, while charities may omit that and give credit to the donors
More organizations are beginning to offer an option for donors to remain anonymous
Providing the option to donate anonymously will protect donors' privacy and rights.
Transparency
Most cryptocurrencies are highly transparent and easily auditable. This makes it easy for donors to see how much cryptocurrencies is going into the charity.
It will make the charity accountable. If donors see a significant amount of funds going to a charity, they expect results.
It helps ensure the charity puts the money to good use and would be easy for donors and non-profits to keep track.
Suitability
Source: Fidelity Charitable, Crypto Altruism, McDermott Will & Emery
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