Cryptocurrency and Its Spot on the Nonprofit Playing Field
Cryptocurrency has been around since 2009; but recently, digital currency seems to be picking up speed (and donations) for nonprofits globally. We originally wrote about Bitcoin in 2018, however, we think it’s time to take a fresh look as so much has changed.
Cryptocurrencies are digital alternatives to money, which remove the need for third-party players such as governments, banks, and payment processors. So now, instead of the USD, Euro, or Pound, we’ll use the USD, Euro, Pound, Bitcoin (BTC), Ethereum (ETHE), etc. Think of cryptocurrency as an official currency that knows no borders.
What does this mean for nonprofit organizations? Removing the barriers and expenses associated with a middleman allows donations to be transferred globally and almost immediately, 24/7 for low fees. Coinbase, a company focused on building the crypto-economy and increasing economic freedom in the world, estimates that sending money via Bitcoin, the first, biggest, and still most well-known form of cryptocurrency, is 66 times more cost-effective and 48 times faster than sending an international wire transfer. This is helpful as I’m sure many people reading this article have sent their wire instructions to hundreds of donors.
Currently, there are more than 10,000 different types of cryptocurrencies, from Ethereum to Bitcoin Cash to Litecoin, with an estimated 300M crypto users, according to The Giving Block, joining the playing field by the end of 2021! In this article, we will explore why this mode of donation may be of interest to donors, the benefits to nonprofits accepting cryptocurrency, and any potential risks of what some are calling Money 2.0.
Cryptocurrency’s Impact on Donor Experience
First and foremost, nonprofits care about their donors and strive to be donor-centric where at all possible. In the nonprofit world, we know and believe that donors make change possible. Our donors are the ones who enable us to accomplish our missions and make our world a better place. And more and more donors are turning to cryptocurrency to fund the missions they care about and believe in. A U.S. donor can maximize their impact by donating cryptocurrency because it’s tax-deductible, in more ways than one. The donor can claim the standard 501c3 tax deduction, and they also avoid paying capital gains tax by choosing this form of currency. This means the full amount of their investment is realized through mission impact and delivery. All cryptocurrency transactions are vetted by a secure technology called a “blockchain”, which means anonymity for the donor, as well as full transparency on how their donations are being used.
Cryptocurrency’s Impact on Nonprofit Fundraising
What are the advantages for the nonprofit? International donations are easier to accept, a reason global nonprofit organizations may want to consider whether accepting this mode of currency makes sense for them. A crypto transaction goes through quickly (from seconds to one hour, the average being 10 minutes), processing fees are considerably lower than credit card transaction fees, and crypto donations are rapidly becoming the preferred investment vehicle for millennials and Gen-Z donors, which could attract a younger demographic of donors. More than 60% of cryptocurrency users are below the age of 40.
With more than $300M in cryptocurrencies donated to nonprofit causes each year, there are now fundraising platforms, such as The Giving Block, that partner with nonprofits, universities, and faith-based organizations to actively fundraise and market for crypto donations. According to The Giving Block, a leader in this space, most crypto donations that come in through their platform for any given nonprofit are through new donors, not current donors. Donor acquisition, as well as retention of current donors, could be a game-changer for many nonprofits.
Additionally, you can fundraise by targeting cryptocurrency investors to build out a prospect list and creating a network. Since there is no public registry of successful cryptocurrency investors, one way to proceed is with some basic Google searches using terms like: “Cryptocurrency companies”, “crypto founders”, “crypto millionaires”, etc. The search results will generally surface the names of various CEOs and others who are heavily involved in the industry.
Cryptocurrency can also be incorporated into your online marketing strategy. Once you have the capacity to accept cryptocurrency payments, you can include the currency logo in your web-based donation platforms. Donations can be accepted via a personal Quick Response (QR) code linked to a Coinbase address. Additionally, it will be smart to let your whole database know that you do accept cryptocurrency, so donors are aware!
Determining What Works for your Organization
Each nonprofit should do its due diligence to determine whether accepting donations in cryptocurrency is prudent for them. Cryptocurrency is based on the market and supply and demand, which means there is a higher chance of volatility and risk. Some nonprofits have made it a practice to sell cryptocurrency donations immediately to avoid the risk of plummeting values. Of course, there is the chance that the cryptocurrency may increase in value, as well! Therefore, some well-known nonprofits, such as the American Cancer Society, Red Cross, Save the Children, and UNICEF have all decided to say “yes” to accept donations in cryptocurrency.
The digital funding space doesn’t stop there. NFTs (non-fungible tokens) are also gaining traction and raising major dollars for nonprofit organizations globally. Whereas cryptocurrencies are fungible, meaning interchangeable and equal in value from one to the next (1 Bitcoin is equal to another Bitcoin), NFTs are unique digital signatures that cannot be replaced with another item. NFTs also exist on a blockchain, making them secure, certified, and transparent. NFTs can take the form of art, GIFs, videos, collectibles, music, and more. NFTs may make sense as a way for celebrities and other philanthropic donors to support nonprofits. There are also platforms that solely create NFTs, such as OpenSea Create, Rarible Creators, NiftyGateway Creators, and Mintbase. It may be worth brainstorming NFTs with artists, well-connected donors, or celebrities that have a connection to your cause. Inviting these philanthropists to the table to help brainstorm creative ideas that will raise money for your cause could be just the right fit for both the nonprofit and the donor, but you won’t know unless you ask.
Speaking of asking, it won’t hurt to ask your board members and lead donors what they think of cryptocurrencies and whether this form of donation appeals to them. Do your research, explore, and weigh the pros and cons. A donor who supports your cause will find a way to give to your organization regardless, but are you limiting yourself by not making this an option? Find out more in our next article where we dive deeper into the environmental impact of cryptocurrency, as well as huge wins for the nonprofits who have seized this moment in digital currency.
About the authors
Piper Hardin, Director, brings 20+ years of professional development experience and nonprofit leadership to Orr Group. Piper has established proven success in creating and implementing strategies for major individual giving, planned giving, annual fundraising campaigns, capital campaigns, corporate giving, and foundation giving. Piper has a track record of generating substantial revenue growth and fundraising $10M+ annually, leading high-performing teams, building long-term relationships with major gift prospects, and planning for multimillion-dollar revenue success.
CJ Orr, Vice President, brings broad experience in fundraising and development, strategic planning, campaigns, and event management to his work with Orr Group’s nonprofit partners. He has led strategic initiatives and fundraising for several large galas and campaigns. In addition, CJ’s background in finance provides him with a strong foundation in analytics, metrics, and ROI, and allows him to bring a data-driven approach to achieve substantial, $1M+ fundraising efforts for our clients. CJ has published articles on cryptocurrency, Bitcoin, and fundraising technologies, and applies this knowledge to provide our partners with the best and most innovative solutions.