How Crypto is Changing Charity
When Russia invaded Ukraine in early 2021, one of the urgent challenges was to get humanitarian aid into the country.
The Ukrainian government’s official Twitter account shared crypto wallet addresses with a call to action to donate in Bitcoin, Ethereum, and USDT.
Later, Ukraine’s deputy minister of Digital Transformations announced that they had raised “close to $100 million” in crypto donations.
Russia’s invasion of Ukraine brought crypto philanthropy to the limelight, but it is not a unique example.
Many large international philanthropy organizations have started to accept crypto donations.
UNICEF launched a new financial vehicle, CryptoFund, to deal with cryptocurrencies specifically. Big organizations such as the Red Cross and Greenpeace have also started accepting crypto.
The Giving Block, a crypto donation platform, reported $69 million in total donation volume in 2022, an impressive 1,558% spike from 2020.
Fidelity Charitable received around $330 million in crypto in 2021, up from $28 million in 2020.
Why use crypto to donate to charity?
There are a few reasons why. One is that sometimes it is the only viable option, as with the above example of Ukraine.
When earthquakes most recently devastated the Turkish province of Kahramanmaras, they also affected neighboring Syrian towns.
While the Turkish government, along with the help of the international community, tried to tend to the victims, those in Syria could not receive humanitarian aid due to international sanctions.
Humanitarian aid to Syria is technically exempt from sanctions. However, Aron Lund, a fellow at Century International, told Middle East Eye, said that in practice, a lack of clarity on what is permissible can delay the aid distribution process.
“Good luck trying to find a bank that will let you wire money to Syria,” Lund said.
That is precisely where crypto comes in handy.
Bank and government regulations are typically targeting fraud and criminal activity in money transfers, but sometimes these regulations are political and can get in the way of innocent people receiving much-needed humanitarian aid, like in the case of Ukraine and Syria.
Another way legal regulations get in the way is with controversial projects like Wikileaks or Tor.
Wikileaks, founded by Julian Assange and John Young, is an Icelandic NGO that has published classified information about many notable figures around the world - including the damning personal correspondence of politicians.
Wikileaks is unable to receive donations due to being blacklisted by international banks but can receive donations via cryptocurrency.
In 2021, the Tor Project, a popular non-profit tool used to bypass online censorship and maintain privacy, received 58% of its donations in cryptocurrencies. This largesse reflected the average crypto donors’ affinity for activist causes, such as data privacy and internet freedom.
Smaller Fees - Another Reason to Go to Crypto
A rather simple reason for choosing crypto donations over fiat is lower transfer fees. These fees are often much higher with fiat transactions via traditional banks, compared to crypto exchanges.
Both donors and organizations want to make the most of the money intended for aid. It's disappointing for both parties when a significant amount is lost to the middlemen, including banks. This is especially true of international donations and wire transfers.
Who Donates to Charity?
Some interesting statistics have recently emerged about this new demographic of crypto philanthropists. They tend to be much younger than the average donor who donates via fiat money.
Younger people have traditionally been a harder demographic for charities to attract.
“The average crypto user has an income of about $110,000 a year, which is quite a bit higher than the average person in the country,” Alex Wilson, co-founder of The Giving Block, said. “They also give significantly more.”
Wilson said the average crypto donation is $10,000, which is more than 100 times the size of an average online donation processed by credit or debit card.
These young crypto-giving folks also seem to be more charitable than their predecessors. According to Fidelity Charitable, the financial services giant’s nonprofit that advises donors on charitable giving, around 45% of cryptocurrency investors donated to charities in 2020, compared to 33% of general investors.
Another interesting side effect of crypto donations is that it brings about creative ways to make donation streams sustainable. One example is NFT giving. NFT owners can dedicate 25% to 50% of the initial sale price to automatically go to a charity, but can also have future royalties built into the donation process.
Donors can choose to program NFTs in a way that, every time they get resold, 5% of the resale price goes to a specified charity, creating a recurring and sustainable donation stream.
Why Do People Donate to Charity?
Aside from the altruistic reasons of wanting to support a cause that is personally meaningful, wealthy individuals and businesses are also incentivized by governments to donate by way of tax deductions.
Donating cryptocurrencies to non-profits is tax deductible in the U.S., U.K., Canada, Australia, and New Zealand, among other countries.
Donating cash to a legally recognized nonprofit qualifies as a tax write-off for donors, allowing them to reduce the amount of taxes they owe.
Donating assets, like crypto or stock, can be even more beneficial than giving away cash.
This is because it provides another important tax incentive on top of the write-off. Since the IRS defines crypto as a “property,” donors don’t have to pay any capital gains taxes on the appreciation of the asset.
“[Donors] get a fair market value deduction at the time of donation and because the nonprofits are also tax-exempt, that means they’re not paying tax on the donations they get either,” Wilson said.
“So that means the nonprofit is getting roughly twenty or thirty percent more money, and the donor is getting twenty or thirty percent higher deductions, and [are] able to give more. So it’s a win–win for both sides, versus if they had to sell the crypto and then donate it…It’s much more tax efficient than writing a check or wire money.”
Donate to Earthquake Relief Efforts with Crypto in Turkey and Syria
You can donate any amount of crypto assets to Earthquake Relief efforts in Turkey and Syria. Below you will find information on some reliable registered charities working on the ground with the victims of this massive tragedy.
DONATE now using this LINK