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Cryptocurrency is becoming a valuable fundraising tool for nonprofits, helping them raise money in new ways.

Five years ago, digital currencies first appeared as a method of transferring money to charity. In 2017, the anonymous creator of a Pineapple Fund, a nonprofit project, gave over 5,104 bitcoins to charity.

Since then, the market for digital donations has grown, with new intermediaries helping donors send cryptocurrency gifts.

Although few West Michigan nonprofits are actively accepting crypto donations, Dorothy A. Johnson of Grand Valley State University says that the emerging trend is worth watching.

Julie Couturier of the Johnson Center thinks that the trend could become a major revenue source for many nonprofit organizations.

She attributes the wealth of people who are starting to give in cryptocurrency to the increasing number of people who are adept at navigating the crypto market and donating to charity.

Unlike stocks, cryptocurrency donations are not subject to capital gains taxes. They can also be treated as appreciated assets like real estate. 

According to Couturier, giving in cryptocurrency is also a favorable reason for people to donate. It can make international transactions easier and less time-consuming.

Cryptocurrency donations to charity have increased significantly in the past couple of years. According to the Johnson Center, their total reached almost $30 million in 2020.

On the donor side, crypto-based donor-advised funds can keep individuals anonymous even as transactions are recorded and viewable on the blockchain. 

The transparency benefits of crypto-based funds are also helping address the concerns of traditional donors.

Although the potential for growth in the cryptocurrency market is promising, it can also be very risky due to its volatility. For instance, Bitcoin’s value has continuously declined since November.

According to Couturier, managing the volatility of the market can be a daunting task for a nonprofit. Aside from handling multiple currencies, it also requires deep knowledge of how to use and manage cryptocurrency.

Aside from volatility, handling digital currencies can also be challenging for nonprofit organizations.

Exploring the Potential

Through third-party intermediaries, such as The Giving Block, nonprofit organizations can benefit from the ease of accepting cryptocurrency donations. According to The Giving Block, the total value of cryptocurrency donations has reached more than $300 million annually.

In November, it was reported that 13 Michigan-based nonprofit organizations had joined The Giving Block. One of them is Kids’ Food Basket, which became the first organization in the region to accept cryptocurrency donations.

The decision to join The Giving Block was made by Kids’ Food Basket’s COO Afton DeVos to explore new ways to support their mission. She noted that accepting cryptocurrency donations was a great opportunity to expand their reach and provide a better way to donate.

After carefully weighing the costs and benefits of accepting cryptocurrency donations, DeVos said that they were comfortable with the decision to join The Giving Block.

Despite the number of nonprofit organizations that are accepting cryptocurrency donations, Keith Hopkins, a fundraising consultant, noted that West Michigan is still a long way from fully accepting crypto giving.

Despite the number of nonprofit organizations that are accepting cryptocurrency donations, Hopkins noted that some may still be prone to accepting fraudulent gifts.

While it’s still relatively rare for nonprofit organizations in West Michigan to accept cryptocurrency donations, Couturier said that they should start to include it in their policies.