Nonprofits Can Increase Access to Capital by Accepting Crypto

Nonprofits Can Increase Access to Capital by Accepting Crypto

By: Prime Trust
Published On: February 4th, 2021

With cryptocurrencies creating a new generation of wealthy donors, nonprofits have the opportunity to innovate how they fundraise by opening their minds to digital assets

On the latest episode of the Building Blocks podcast, host and Prime Trust CSO, Kevin Lehtiniitty talks to author and crypto fundraising expert Anne Connelly about why nonprofits are increasingly opening their organizations to crypto donations. With mainstream organizations such as the United Nations, American Red Cross, American Cancer Society, and Unicef, accepting crypto assets, digital assets are proving  that they can scale in a way that traditional fundraising can’t match.

Benefits for nonprofits

Increased donor pool

Nonprofits must compete with many worthy causes for a pool of donor capital. But crypto donors present a relatively untapped market of young, passionate, and often cause-driven patrons. Connelly explains that the ethos of crypto closely aligns with the ethos of charitable foundations. She notes that there is a pent up demand from crypto donors to give to causes that they support and by enabling the acceptance of crypto, nonprofits can serve that demand. The bonus? If you can accept securities as a donation, you can accept crypto.

Increased transparency, immediacy, and security

Blockchain, the technology that underpins bitcoin, ethereum, and other crypto assets, allows for assets and transactions to be traced. This transparency gives donors assurance that their funds will reach the cause, and instills a new kind of trust between donors and nonprofits.

Blockchain also allows assets to be transferred quickly and securely around the world, without need for a central authority like a bank to process funds. For organizations that seek to support causes where people don’t have access to a reliable financial system, sending money can be frustrating, cumbersome, and sometimes nearly impossible. Crypto provides an exciting opportunity to distribute resources to anyone with a smartphone and an internet connection. 

Diversified revenue growth

Crypto can act as a store of value for nonprofits seeking to preserve their donations. We’ve recently witnessed many U.S. corporations designate a portion of their treasury to bitcoin for this very reason. Of course, cryptocurrencies are volatile assets, so organizations must determine what level of risk they’re comfortable with if they consider leaving a percentage of funds in crypto. Nonprofits that seek the benefits of crypto assets but are risk-averse may consider a stablecoin because it is pegged to a reserve asset like USD, giving it stability in a volatile crypto market.

Benefits for donors 

Significant tax benefits

Importantly, donating crypto means that the donor does not have to pay capital gains tax on the asset. If the donor were to sell their bitcoin and then donate, they would incur a capital gains tax. For crypto investors who have been holding bitcoin for many years, that could result in a massive tax bill. The IRS classifies cryptocurrencies like stocks, as property. As long as the asset has been held for more than a year, the donor doesn’t pay capital gains tax on the appreciated asset. This means that with bigger gains come bigger tax write-offs, a significant incentive for donating crypto. 

Living the crypto philosophy

Passionate supporters and holders of bitcoin view the asset as a superior asset to fiat currency, which can be devalued by inflation with increases to the monetary supply and subject to the requirements of an antiquated financial system. As a finite, decentralized technology, bitcoin is more easily transferred and provides users with autonomy. Crypto also allows donors anonymity, which crypto donors often prefer.

How nonprofits can accept crypto and access greater capital

While it presents many benefits to nonprofits, crypto can be complex. Charitable organizations should be focused on their mission, not on the configuration of a platform to accept donations. Prime Trust provides easy on- and off-ramps for accepting, custodying, and selling crypto assets with our CoinRamp widget, and our liquidity, settlement and custody APIs.

PrimeTrust makes crypto simple with a quick copy and paste integration. Donors who are giving crypto never have to leave your site, providing a seamless and intuitive user experience. We support several crypto assets, including BTC and ETH and stablecoins USDC and USDT. Start accepting crypto donations today in a way that works for your organization. Get in touch with us to learn more.

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