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Have your read our Crypto and Philanthropy White Paper and still had questions? Ready for what's next? Read below for a nonprofit Q&A with Infinite Giving's CTO, Seth Radman. These are some of our most asked questions. Spoiler alert - Infinite Giving handles all of this for our investment clients.
What are the requirements for an organization to accept Crypto currency and what are the risks for a nonprofit in accepting such gifts?
To my knowledge, all non-profits can accept crypto donations. There are no requirements. Your biggest risk is potential losses if you don't convert to fiat (USD) immediately due to the crypto market volatility. Your end of year accounting and Form 990 return will be slightly more complex, but it's usually worth it depending on the volume of crypto donations you receive. Crypto donations are valuable asset donations, similar to stock gifts.
What are the different types of crypto currency and exactly why would anyone want to use them?
There are thousands of different cryptocurrencies, with the most popular ones being Bitcoin and Ethereum. They have surged in popularity because they are peer-to-peer currencies not tied to any centralized financial institution. They have low fees and provide great functional value using blockchain technologies. In general terms, it is a currency that is used worldwide, and has many improvements over a cash system. If you think about crypto as a global form of currency, the value will seem more obvious.
Would you suggest that an organization set up a separate bank account to tie into the wallet we set up to receive crypto gifts?
No, there is no need to create a separate bank account. I recommend setting up an wallet with an exchange or using a crypto donation tool like Infinite Giving that generates and manages the wallets for you. You can then link directly to your regular checking account. There is no reason for additional bank accounts.
How do we know what type of wallet we should select?
You should use a custodial wallet provided by a crypto exchange, like Coinbase or Gemini, so you can easily convert crypto to cash and transfer to your bank account. Most providers, like Infinite Giving, partner with one of these exchanges on your behalf to make the process easier.
When is it best to sell a crypto donation?
We recommend you sell crypto immediately upon receiving it to avoid potential losses due to market volatility. At Infinite Giving, we serve as your fiduciary and are required to have your best interest in mind at all times. Thus, we do not allow our clients to hold or buy crypto, just receive it. There is significant value, but it is volatile over the short and long term. If you're looking to invest nonprofit reserves to grow funds, we recommend a low-risk diversified portfolio of stocks and bonds instead of investing in crypto.
How do you get your board to agree to accept crypto if you have an intermediary – such as the Giving Block – that would keep the organization away from actually holding onto the crypto.
I can't comment on exactly how the Giving Block works, but your concern is a valid one. Some people aren't yet comfortable using a third-party service that manages crypto for them. It is a tradeoff between convenience (a custodian managing funds for you) and control (you managing your own crypto wallet and private keys). The U.S. government has been making progress to establish better regulations to govern custodians.
When creating a gift acceptance policy for crypto currency, should we establish a minimum amount? What are the pros and cons?
According to Fidelity, the average crypto donation size in 2021 was around $10,000. Since crypto donors typically donate more, you could set a minimum donation amount. However, the best crypto donation tools should work easily for you regardless of donation size. You should not need to pay a subscription fee or anything up front to receive crypto gifts. That way minimums become a non-issue. You do not need to pay to play.
What fees are associated with accepting crypto currency?
It depends on the service. I believe the Giving Block charges a 5% fee for every donation in addition to a monthly or annual subscription. Other crypto donation tools like Infinite Giving and exchanges like Coinbase and Gemini are free to use and charge around 0.5% to cover crypto network fees and conversion fees.
Should we be concerned about crypto’s impact on the environment? Is that an issue that organizations have had to face?
Crypto has been criticized for its environmental impact. While fair, many projects have been actively improving their technology to be more efficient. For example, Bitcoin's lightening network and Ethereum's upcoming 2.0 merge will significantly improve efficiency and reduce environmental impact which is great news. As a side note, there are many changes society can be making to reduce environmental impact that would have more influence than a nonprofit accepting a cryptocurrency gift.
Going forward, what percentage of donations do you anticipate will be made in crypto?
It's hard to predict, but crypto donations are growing at an exponential rate. According to Fidelity, there was a total of $330 million in crypto donations in 2021, up from $28 million in 2020.
I’ve heard a lot of people talking about Giving Block. What’s the break even point in donations after the initial investment?
I believe the Giving Block charges a 5% fee on all donations received in addition to a monthly or annual subscription. The breakeven point for you depends on the volume of crypto donations you expect to receive. I personally would steer away from crypto donation services charging more than 1% because this can add up quickly with large donor bases. There are other easy and significantly more affordable alternatives like Infinite Giving.
Are there crypto currencies that we should avoid? Any that seem unstable to you?
All cryptocurrencies, including stable coins, are subject to volatility. It's ok to accept any cryptocurrency supported by your exchange or crypto donation tool as long as it has a large enough market cap to ensure liquidity so you can convert to fiat (cash) immediately. If you want to be extra cautious, you can choose to accept only the top cryptocurrencies right now, such as Bitcoin, Ethereum, USDC, and Litecoin. These are the most popular for crypto donations.
We hope this Q&A is helpful as it covers the questions we get asked most often. Remember the average crypto gift is $10,000 and there is most certainly someone in your donor circle who holds crypto and would like to generously give to your organization. We'd love to help you receive those donations.
