With new ways of making money coming into vogue every day, new approaches are coming up too. Crypto asset is one of those, which is now worth more than all the U.S. dollars. It has forced the finance industry to re-examine transparency, efficiency, and power distribution.
In this article, we will discuss how crypto-assets can be used for philanthropy.., For a start, let’s discuss what is Crypto Philanthropy.
What is crypto philanthropy?
Crypto philanthropy is a charitable act of giving by individuals and organisations to support a cause. The only difference is, that the giving is done by donating Crypto-assets as opposed to cash, stocks, or other assets. Since 2008, crypto asset trading and investing have become a popular choice, giving rise to more donations to charities and nonprofit organizations. Recently, the volume of crypto donations has exponentially risen annually. In 2020, the crypto donations summed up to US$4.2 million with a more than 10-fold increase to $69.6 million in 2021, with the numbers rising continuously in 2022, indicating the emergence of an era in digital asset philanthropy.
In the past two years alone, Charity auctions have put forth that NFTs and digital currencies are more utilisable. The way digital technology is disrupting traditional stock investing methods allowing access to a wider audience, crypto donations offer tremendous opportunities for charitable organisations to make the most of philanthropy.
Some of the important benefits that one can leverage with crypto-philanthropy are:
· It has a digital agreement in place
· It is global and decentralised
· It can be done with minimal expenses
· It can be accepted at reduced taxes
· It offers transparency to the giver
Ways by which Crypto Philanthropy is Executed
The charitable way of giving crypto assets is done in the following ways:
1. Fundraising with Bitcoins
Recently, more charities have been accepting bitcoin donations. The organisations that include this are the Electronic Frontier Foundation, Heifer International, Red Cross, Save the Children, and United Way. After getting established, bitcoin is accepted via an online “wallet” to exchange it for fiat currencies. Bitcoin charity donations are tax-deductible, and donors get the benefit of avoiding capital gain taxes on the dollar amount value of the crypto asset donations.
Several foundations, such as San Francisco Foundation and Silicon Valley Community Foundation (SVCF), have accepted crypto donations.
Crypto fund Endaoment, built on blockchain, accepts crypto assets from fund applicants. Unlike traditional donor funds, charity payments are transparent and are trackable on the blockchain.
3. New Revenue Streams
The rise in crypto-philanthropy has made the new charity revenue streams available. According to the latest statistics,25 percent of millennials in the United States have and trade crypto assets, with the number only increasing, making the crypto-philanthropy more prominent.
New charity revenue streams have been coming up from profitable blockchain companies. Ripple has donated $1.1 million to a COVID-19 emergency fund, and Coinbase, valued at $100 billion, has committed to giving 1 percent of its profits, equity, and time for charitable activities.
Challenges faced by Crypto Philanthropy
Although crypto philanthropy has been taking rapid strides over the past few years, some challenges are faced while making crypto donations. There is a prevailing fear, and lack of understanding as the crypto space can be confusing, with bizarre terminologies.
It also faces the issue of lack of transparency as the donors can refer to only the relevant blockchain for ensuring a complete transaction. Taxes imposed are also a major issue in making crypto donations because of the taxable charity donation regulations by the US. Removing these setbacks and addressing the misconceptions related to crypto will generate new donors.
There are certainly more challenges that could slow the growth of crypto-philanthropy. The digital currency donations and blockchain-centric philanthropic systems are new and not user-friendly. Individual givers, charities, and foundations still have limited awareness of crypto-philanthropy.
The crypto market is extremely volatile and unregulated, having fluctuating currency values of 10 percent or more traded daily. The charities accepting bitcoin or other digital currency donations anticipate rising value.
Ø Crypto charity or crypto philanthropy is the term by which donations are made in the form of crypto coins.
Ø Since its inception, the value of the crypto assets has risen, adding up to more donations in the future years.
Ø Bitcoin fundraising, revenue streams, and foundations are some ways of donating crypto assets.
Ø Although it is beneficial, some challenges are faced while making crypto donations in the form of taxes and lack of transparency.
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