Why Now is the Time for Your Nonprofit to Engage in Crypto Philanthropy.
The accumulation of wealth, budding enthusiasm, and community-building around cryptocurrency have nonprofits of all sizes and missions contemplating the role this movement should play in its fundraising efforts. For those who have waited on the sidelines until now (including me), circumstances are conspiring for this to be the ideal moment to engage. While there are many common objections, at this point most can be answered, and the opportunity is starting to become larger than just one of financial benefit.
The time is now!
The wealth being accumulated by cryptocurrency holders (often called, “hodlers”) is significant. In the past year, Bitcoin, the most widely held cryptocurrency, increased in value by 16% (as of January 18, 2022). At its peak value in early November 2021, it had more than doubled in value in just three months. Wherever wealth is being made, fundraisers and nonprofits need to pay attention. On the flip side, when individuals are dramatically increasing their net assets, they begin to look closely at philanthropy. Whichever side of the equation you’re looking at, as a nonprofit fundraiser, the opportunity is obvious.
At the same time, cryptocurrencies are becoming mainstream. This is no longer the hobby of the “tech-bro” next door or your neighbor’s teenaged daughter making bank trading Dogecoin. Increasingly, traditional investors – the types that have long fueled philanthropy – are diversifying their portfolios with cryptocurrencies. These people are likely already your donors, so speaking to their latest passion and making it easy for them to transact donations using it, will prove beneficial.
Over the past several years, the topic of accepting cryptocurrency donations has come up within many organizations and has been rejected. However, as the field evolves, I’d encourage leaders to reconsider their initial objections. Some of the most common concerns I’ve heard relate to the ability for donors to remain anonymous, and the mechanics involved, particularly in regard to the price volatility of cryptocurrencies.
Certainly, an organization can structure its gift acceptance policies to exclude accepting cryptocurrency donations from anonymous donors. However, if you currently accept Donor Advised Funds, you’re already running the risk of accepting money from donors anonymously whose values you don’t share. As cryptocurrencies are increasingly being moved and liquidated on exchanges, anti-money laundering and other statutes are being applied just as they are in more traditional banking environments. Likewise, in the cryptocurrency space, the number of transactions and hodlers deemed to be untrustworthy or criminal in nature is decreasing enormously (down to just 1% according to some recent reports). Further, it seems unlikely that those using cryptocurrency to mask illegal activity would be philanthropically inclined.
The mechanics of accepting these gifts are important to get right, as the enormous price swings of cryptocurrencies can create risk for organizations. Typically, an organization’s investment and gift policies would require liquidating any stocks received as donations; I’d encourage you to apply the same policy to crypto donations. The challenge, however, lies in the 24/7 nature of crypto exchanges. Whether you set up to receive cryptocurrency as a donation through your traditional banking relationship, independently via one of the exchanges, or with a service like The Giving Block, ensure a mechanism is in place for 24/7, near-instantaneous clearing and liquidation.
The opportunities are many.
Simply providing the opportunity for people to donate an asset like crypto that is fast-accumulating in value is a best practice, donor-centric solution. That alone would be reason enough to establish the mechanisms and policies needed to accept cryptocurrencies and promote crypto philanthropy. However, actively engaging the crypto community has numerous additional benefits.
Attracting new donors
The claim that accepting cryptocurrencies as donations would expand your donor base was one I was most skeptical of. I was wrong. The unique community that has emerged around crypto and “Web 3.0” generally, is a diverse demographic that shares a common ethos: decentralizing technology and data to become active participants and shareholders (of tokens or cryptocurrencies), rather than passive customers or products of big tech platforms. They are attracted to organizations that share this ethos and, in their effort to promote the ability for cryptocurrencies to replace traditional fiat, actively seek out organizations that will accept these currencies.
Attracting new board members
If a new, booming industry suddenly popped up in town, any good nonprofit CEO and board chair would begin to ideate how they could secure board members from this industry to expand their network. The crypto sector is one that is growing fast and is already very much present in our community. As an added bonus, board members from this industry may not only bring recently accumulated and often significant wealth, but also likely bring an acute understanding of the field, market, community culture, and tools, which will be increasingly relevant as ‘community’ becomes the defining element donors, volunteers, staff, and stakeholders seek.
In short, the time to engage in crypto philanthropy is now.
As you begin (or continue) to have crypto donation conversations with your leadership, fundraising team, and board, be sure to do your due diligence. Research best practices, seek out advice from knowledgeable community members and peers and weigh the pros and cons (if any) of integrating crypto donations in your organization specifically. At the same time, be sure to understand that you risk leaving money on the table, and missing out on transformational acts of philanthropy, if you choose not to accept it.
For more resources from Orr Group on cryptocurrencies and their impact on fundraising, check out the below:
About the author
Craig H. Shelley, CFRE, Managing Director, brings a change-management and entrepreneurial approach to nonprofit strategy, fundraising, board recruitment, and board development. Craig is a trusted partner and advisor to the nonprofit sector’s most ambitious leaders and specializes in helping organizations forge new paths to unprecedented impact. Craig has first-hand experience in driving transformational fundraising efforts for our clients, and as such, has developed an innovative and best-practice approach to successfully design, implement and strengthen sustainable fundraising programs using cutting-edge giving methods and technologies.