How can cryptocurrency support nonprofits’ fundraising strategies

Kwami Ahiabenu ll
4 min readNov 30, 2023

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Nonprofits are very important institutions in our society today, they provide important services and support systems in areas where governments are not able to provide these services. Nonprofits derive their revenue from multiple sources such as individuals, governments, foundations and companies among others. Most non-profits receive such donations from traditional financial systems using instruments such as cheques, bank transfers, debit or credit cards, mobile money and other digital payment platforms.

The evolution of non-profit fundraising strategies means most non-profit organizations are open to new ways of receiving funds/donations which come as a result of successful fundraising. One new tool, some nonprofits are using to receive donations is cryptocurrency; a digital currency designed on cryptography. Cryptocurrencies are not issued by any central authority such as a central bank, thereby theoretically shielding it from control or interference by any government. Cryptocurrency are not legally permissible in some jurisdictions, however, global acceptance is growing at a rapid rate and https://thegivingblock.com/annual-report/, estimates crypto donations to nonprofits are expected to surpass $10B in the next decade.

There are a number of options open to non-profits interested in receiving donations in cryptocurrencies. First, they can set up their own wallet on platforms such as Coinbaseto receive payments and convert proceeds into fiat currency using their banks. Second, nonprofits can make use of third-party cryptocurrency payment processors who are specialised in processing cryptocurrencies donations for non-profits such as The Giving Block, (https://thegivingblock.com ), Freewill ( https://nonprofits.freewill.com/products/crypto) Engiven (https://www.engiven.com/crypto-donations ) for a fee, or for free such as (https://www.every.org/crypto ) does.

Non-profits can decide to accept cryptocurrency donations after taking into consideration legal and other risks. The recommendation is for the non-profit to produce a written gift acceptance policy which can provide guidance on how to navigate cryptocurrencies as an instrument for receiving donations. This can be done by updating the non-profit’s gift acceptance policy. Once this is done, it must take steps to undertake a robust due diligence process to help select a third-party processor. To be successful at leveraging crypto fundraising, a nonprofit must educate its audiences about the benefits of crypto donations such as tax benefits etc. Also, it must market this opportunity to millennial and Gen Z donors since, they are more likely to give through this channel.

Some nonprofits may face challenges in dealing with cryptocurrencies. Due to its novelty, cryptocurrencies are plagued by misconceptions leading to uncertainty and doubts. For instance, there is the perception that persons using cryptocurrencies are criminals and cryptocurrencies are a passing fad which will disappear over time. To deal with this challenge, non-profit interested in cryptocurrencies philanthropy must invest in understanding how it works. It is important to note that most of crypto fundraising myths have been debunked.

Cryptocurrencies, of course, do have risks and fraud associated with it, but these issues are not peculiar to this payment instrument since the banking system faces similar risks too. Another myth about cryptocurrencies is its price volatility. Although cryptocurrencies are volatile there are ways to deal with such price fluctuations. The recommendation will be for non-profits to convert cryptocurrencies once they receive it into fiat currency to mitigate against price fluctuations. That is if a nonprofit receives donations in X amount of Bitcoin, it must convert this into USD, rather than keeping it in Bitcoin which is subject to price instability. Another way of overcoming cryptocurrencies price swings, is for a non-profit to accept only stable-coins, which are cryptocurrencies backed by reliable assets such as USD which improves price predictability and stability.

There are a number of reasons why donors are leaning toward the use of cryptocurrencies. Individuals making donations using cryptocurrencies are not responsible for paying capital gain tax on appreciated crypto once it is donated. Some companies, especially tech startups, may prefer cryptocurrency as a mechanism for giving in fulfilling their Corporate Social Responsibility. Also, crypto is now a popular tool for peer-to-peer fundraising campaigns, for example, a mass movement was created to provide aid to Ukraine through crypto donations. Another opportunity for crypto donations is for individuals to donate to Donor-Advised Funds which is a pool of funds managed by an entity for charitable giving.

While cryptocurrency may not be a permissible currency in some countries, it does not disbar a nonprofit from receiving such donations. They can set up an account with a third-party cryptocurrency processor in a country where cryptocurrency is accepted and once donations are received these can be converted into cash within milliseconds, showing no link to cryptocurrencies in their books.

In conclusion, a new generation of rich donors are holding funds in cryptocurrencies, they are excited to donate with cryptocurrencies and evidence points to these modern-day philanthropists redefining what it means to support charities by making donations worth hundreds of millions in crypto donations. Although there are some challenges dealing with crypto donations, it is a new reality, nonprofits therefore must embrace these new ways of fundraising in order to support their quest to do good in the world.

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Kwami Ahiabenu, II (Ph.D.) is a Tech Innovations Consultant
E-mail: Kwami AT mangokope.com

First published by https://www.myjoyonline.com/kwami-ahiabenu-ii-how-can-cryptocurrency-support-nonprofits-fundraising-strategies/

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