Crypto: Today’s Currency
Modern non-profits have had to adapt to a lot of technological advancements. Over the past two decades, most have moved away from cash and checks to adopt online portals where they can take bank transfers and credit cards. Donation software like ours continues to be on the cusp of innovation, like with text giving. Now, many find themselves asking: What are crypto donations, and are they the next big thing?
As cryptocurrency continues to charge its way into our daily finances, non-profits have been quick to pick up on this new opportunity. While they may not be taking over credit cards anytime soon, here’s the answer to common questions and some additional info you should know about crypto donations.
What Are Crypto Donations?
When most people ask, “What are crypto donations?” they’re really asking, “What is cryptocurrency?” A crypto donation is merely a donation made using cryptocurrency, which is a virtual currency that’s designed to be used like a standard dollar without the physical component.
As of 2022, there are millions of cryptocurrency users, but what makes it complicated is that there are so many different cryptocurrencies. Bitcoin (BTC) and Ethereum (ETH) are the two most widely used cryptocurrencies in the world, but Zcash, Litecoin, and Bitcoin cash, along with many others, follow close in line.
Is it Legal to Accept Crypto Donations?
Most nonprofits that begin asking questions about crypto donations will also be concerned with the legality of cryptocurrency. For those unfamiliar, cryptocurrency can seem confusing, but rest assured that accepting cryptocurrency is entirely legal, so long as you are disclosing the transactions in accordance with tax law.
While cryptocurrency is expected to become more widely used in our society in the coming years, people and non-profits alike tend to associate it with extra complexity. It’s true that the regulations on using and reporting crypto and crypto donations are still evolving, so any non-profit that plans to accept them should consult a professional first and periodically as time goes on.
Why Should I Accept Crypto Donations?
As Bitcoin and Ethereum reached record highs alongside the media attention received by fan-powered coins like DOGE last year, many non-profits began opening their doors to crypto donations.
The fact is, cryptocurrency can’t be used in place of the dollar at most stores just yet, but that’s part of why non-profits have begun adopting it. Supporters of cryptocurrency love to use it whenever they get the chance because it’s the first step towards standardizing the use of crypto.
This isn’t to say that accepting crypto donations is merely a gimmick. Rather, accepting crypto can help your organization gain some traction in the crypto community and it provides existing supporters with another way to donate. That’s important to remember: We aren’t saying crypto is going to replace anything. At Donorwerx, we preach flexibility by offering donors multiple giving channels using our software.
Children International is just one major charity that accepts crypto, and they state: “We believe that accepting cryptocurrency will result in donations we may not otherwise receive, as well as connecting us with new supporters.” With this same mindset, charities big and small are following suit.
How to Start Accepting Crypto Donations
If you’re interested in accepting crypto donations for your non-profit, there are a handful of steps you need to follow.
1. Ask if Your Charity is Ready
Crypto donations are on the cutting-edge of FinTech, so it’s not something you should pursue out of the blue. If your charity doesn’t already have a strong digital presence with a reliable website and sleek donation portal, crypto donations shouldn’t be the next thing you focus on.
Instead, get your website up-to-par and make sure you can accept more popular forms of digital donations (i.e., credit cards, PayPal, and bank transfers) before you think about adding crypto donations. DonorWerx can help set you up with donation software.
Once you get to that point, consider your charity’s budget, reach, and community. For many charities, crypto donations won’t add a lot of value right now. It’s important that you prove the need for crypto donations before you add them or else you may end up wasting precious resources on this endeavor.
2. Consider The Legal Implications
If you decide that accepting crypto donations makes sense from a marketing and growth point of view, the next step is to speak with a professional tax advisor, accountant, or another professional who can guide you through the changing regulations. Failing to take this crucial step could land you in hot water.
For instance, crypto donations are typically tax-deductible for the dollar amount they’re worth at the time of the donation, but this can vary on a case-by-case basis, like how long the individual held the crypto before they donated it to you. So, you wouldn’t want to tell your supporters that their crypto donations are tax-deductible unless you’ve confirmed it with a tax advisor.
Aside from knowing how crypto donations will impact donor finances, you also need to consider how they will impact your organization’s finances. There’s no way around the fact that accepting crypto donations will lead to more paperwork and reporting, which requires plenty of resources.
3. Decide How You Wish to Process Crypto
For non-profits that decide to move forward with accepting crypto donations, the next step is deciding how you wish to process these donations. You have a few options:
- Specialized nonprofit processors, like Giving Block, allow charities to set up an easy web form where donors can use any of the most popular cryptocurrencies to send a donation. They’ll simply select the type of crypto, put in the amount, and then complete the transaction by copying the wallet address or scanning the QR code.
- Crypto exchange checkout systems, like the one offered by Coinbase, allow stores to embed a payment form into their website. The downside is that these forms are not created specifically for non-profit use, so verbiage and flow may not align well with the donor experience.
- Crypto wallets, which is a technical but highly secure option that allows you to send and receive cryptocurrency using wallet addresses. This is the least user-friendly option because there’s no embedded form to walk them through the process.
The method you choose will depend on your organization and its community. If you know that there are plenty of avid crypto users amongst your supporters, a wallet is one of the quickest to set up, and experienced crypto users will have no issues sending donations.
On the other hand, a checkout or specialized processor will provide the most “familiar” and customized donation experience, but requires more planning and up-front investment.
4. Remember That Building It Isn’t Enough
The old adage of “Built it and they will come” simply doesn’t apply when talking about donations. This is something we talk about all the time here at Donorwerx because so many of our users get confused. They think adding a kiosk, a web portal, or even a crypto donation form will allow more donations to flow in–but that’s not the whole story.
Before people donate to your non-profit, they need a reason to do so. Adding a new donation method will not increase donations unless you add it in tandem with new campaigns to reach new supporters. Interested in learning more? Donorwerx offers donation software and coaching programs to help charities inspire sustainable giving that helps them grow. Get started today!