Crypto Charity 101: How To Donate Crypto Tokens
The rapid growth and constant evolution of the crypto world have opened up so many doors to trends and innovations that we would have never thought about ten years ago.
Crypto philanthropy is one of these innovations that is becoming increasingly popular, both with crypto donors and charitable organizations worldwide.
The blockchain technology has brought us many novelties like play-to-earn crypto games, DeFi, DAOs and much more.
Our aim today is to look into cryptocurrency donations and discover the benefits of donating crypto instead of dollars or any other fiat currencies. If, after reading this article, you'll feel compelled to support a nonprofit organization, we'll also inform you which charities accept digital coins.
Crypto charitable giving - Is it a thing?
In 2017, an unknown crypto investor, under the pseudonym "Pine," created the Pineapple Fund, an organization aimed to experiment with crypto philanthropy. The mysterious donor gathered $55 million worth of Bitcoin funds and gave it all to 60 different public charity organizations, from environmental and mental health non-profits to social justice and homelessness charities.
Since then, more and more non-profit organizations, including world-renowned ones like the Red Cross and United Way, have started to accept donations in Bitcoin or any other cryptocurrencies. For example, in 2019, UNICEF became the first U.N. organization to receive and make crypto transactions via its crypto donation platform, the Cryptocurrency Fund. Two years later, they declared having received from cryptocurrency investors 2,267 ETH and eight Bitcoin (worth over $5 million at that time).
It appears that more and more people who are into charitable giving (and have the means, too) prefer donating cryptocurrency instead of traditional funds.
Crypto donations benefits
There's a reason (actually several) why both donors and charities have started to lean more into donating crypto directly: we're talking about tax benefits, long-term capital gains, privacy, tax deduction advantages, and more.
Crypto offers enhanced privacy
Crypto charity enables young people to donate to any particular cause they are interested in by making direct donations in the tokens they hold. Donors in general, especially younger ones, are interested in data protection and privacy.
Donating Bitcoin directly, or whatever tokens you hold, can better protect your personal information, even if the amount is considerable.
No capital gains tax for crypto donations
You probably had no idea that all crypto donations are tax deductible in several countries around the world, including the U.S., the U.K., Australia, New Zeeland, and Canada. That means you won't have to pay any fees when you make a donation in currencies like Bitcoin cash, Bitcoin, Ethereum, etc.
That's not the case if you convert your crypto to fiat before giving it away to charity. You would have to pay capital gains tax for the entire sum. What are capital gains taxes? These taxes are applicable when you sell or donate an asset that's increased in fair market value since you first acquired it. By donating a long-term appreciated asset directly, you can deduct the fair market value of the crypto at the time of a contribution.
Let's say you bought your BTC crypto coins some time ago for $1000, and it's now valued at $2000. By donating Bitcoin directly as cryptocurrency, you'd benefit from the tax deduction for the entire amount. If you converted the tokens to dollars, your funds would not benefit from the charitable deduction. You would end up paying 20% to 30% off the donation amount in local taxes instead of giving them to the nonprofits.
As you can see, crypto charity ends up being more tax efficient than regular charity.
Fewer transaction costs for charitable organizations
Most people that support an NGO usually send the money online, paying with their debit card or credit card. The simple act of paying by card can substantially reduce the donation the non-profit organization receives, as processing fees can range between 2.2% and 7.5%.
If the donation is made in crypto, the fees are much smaller, and your favorite charity receives those additional funds that otherwise would be lost. Transaction times are way faster, too, merely seconds or minutes instead of hours or days.
Stablecoins reduce volatility risk
Non-profit organizations might indeed worry about volatility when they decide to accept crypto donations. However, if they are unsure of Bitcoin cash, Ethereum, etc., they can opt to accept donations in USDC or other stablecoins.
Stablecoins are cryptocurrencies backed up by major fiat currencies like the U.S. dollar or the Euro, making them less volatile than other coins.
Before you donate Bitcoin, research what types of virtual currency the organization agrees to receive.
How to donate crypto in 3 steps
To get you started with cryptocurrency donations, you need to take into consideration 3 main steps:
Step 1- Get a wallet
First of all you'll need a crypto wallet to store any tokens you might buy. You can get a free wallet like Metamask that supports multiple coins and we'll teach you how to set it up and connect it to Polygon.
Step 2- Buy crypto
It's simple. You can't donate tokens if you don't have any. Go to a decentralized exchange and buy the coins you want. By donating them directly to the charity, you won't pay the capital gains tax if your assests have increased in fair market value since you purchased them.
Step 3- Choose the non-profit for you donation
Depending on the tokens you hold, you can choose a charity that you wish to support and send them the coins. Most nonprofits today accept crypto so it won't be hard to find the right one to support.
Nonprofits that accept crypto donations
Whether you are considering supporting a public charity focused on human rights, saving the planet, or accessible education for everyone, many NGOs are already welcoming donations in digital currencies. We're listing here just a few:
Charities that accept only Bitcoin
Greenpeace: The global organization focused on environmental issues now accepts charitable contributions in Bitcoin.
Red Cross: Both the International Red Cross and Red Crescent network work to help people during conflicts, in response to natural or man-made disasters, or due to conditions of chronic poverty. The network accepts Bitcoin.
United Way: This organization helps people around the world by fighting for their health, education, and financial stability rights. They accept Bitcoin.
Charities that accept Bitcoin and Ethereum
Human Rights Foundation: This nonprofit organization that promotes and protects human rights globally, is currently welcoming contributions in Bitcoin and Ethereum.
Electronic Freedom Foundation: EFF protects user privacy, free expression, and innovation through impact litigation, policy analysis, grassroots activism, and technology development. They can be supported with Bitcoin, Bitcoin Cash and Ethereum donations.
Nonprofits that accept any other cryptocurrencies
Daffy Charitable: The Daffy App allows users to donate crypto to over 1.5 million charities, transforming the amount into cash.
The Giving Block: It's a crypto donation solution that brings donors and NGOs together on the same platform. Many crypto investors that donate and well-known charities work with The Giving Block.
Freedom of Press Foundation: The organization focused on preserving press rights accepts Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and ZCash.
GiveCrypto.org: It's a nonprofit that distributes cryptocurrency to people living in poverty. Accepts: Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and USDC via Coinbase Commerce.
Save The Children: This world renowned charitable organization was the first NGO to accept a Bitcoin donation in 2013 in response to Typhoon Haiyan that badly hit Southeast Asia and devastated the Philippines. Through The Giving Block they accept crypto donations from multiple cryptocurrencies like Ethereum, Solana, Tether, Cardano, Polkadot, and many more.
Rainforest Foundation: The Rainforest Foundation works to secure land rights for indigenous people. They accept: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Tor Project: This project focuses on allowing people to have private access to uncensored internet, being considered a tool for privacy and freedom online. Accepts: Bitcoin, Augur, Dash, Litecoin, Monero, Stellar Lumen, ZCash, and Ethereum.
Final thoughts
Cryptocurrency charity is gaining more traction daily, with many organizations seeing the benefits of receiving digital coins instead of fiat currencies. At least for tax purposes, it seems more advantageous for every party involved if the donation is made directly in a virtual token.
In this article, you learned what capital gains taxes are and that it's better to donate Bitcoin directly or any other cryptocurrencies so you can deduct the fair market value of the crypto at the time of a contribution. Being able to benefit from this charitable deduction when you make a direct donation instead of converting the tokens to fiat currency first helps you save up to 30% that would go to local taxes instead of your chosen nonprofits.
Now that you know how to donate crypto, you can join the thousands of crypto donors that use platforms like The Giving Block or Daffy Charitable to give back to the world through crypto philanthropy.
When it comes to philanthropy, making informed decisions is essential, especially if you're donating a considerable amount. So, as always, our advice is to DYOR!
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