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For many, cryptocurrency is still a new and unfamiliar concept. Especially in the nonprofit space, many organizations are unaware that it can be a valuable source of donations, especially from younger donors, as the market cap reaches all-time highs.
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What are some examples of cryptocurrency, and why is it so compelling to people as a means to give?
The most popular cryptocurrencies today include Bitcoin and Ethereum. It's compelling to people as a means to give because it is a digital asset that has appreciated a lot in value. Last night, when I checked, the crypto market cap was $2.38 trillion, and many owners are holding onto this appreciated crypto right now. That leads to wanting to donate it more for tax deductions. Donating crypto is a non-taxable event, so there can be significant tax advantages for the donor to donate crypto directly instead of selling it first and then donating the proceeds. If they hold onto the crypto for more than a year, they may be able to avoid capital gains tax and potentially deduct the total fair market value.
Is cryptocurrency something that the average age of the person who holds it skews on the young side?
We're seeing that around 20 million or 14% of adults in the US own crypto, 66% of the remaining are crypto curious. We also see that the average crypto holder is a 38-year-old male making approximately $111,000 a year.; this comes from a Gemini report. They did a broad survey of investors, and around 14% of those people in the sample were crypto owners, 66% were crypto curious, and more than half of the crypto curious were women.
Pivoting to year-end and kind of the nonprofit landscape, why should nonprofits care about cryptocurrency, and why should they investigate it more?
The first thing is that the crypto market cap is high right now. Even if you don't necessarily believe in the future of crypto, nonprofits need to understand how to accept crypto because there might be donors who come knocking on your door that own crypto and want to donate to you. Fidelity Charitable noted back in 2018, when there was a shoot up in the valuation of Bitcoin, that there was a tenfold increase in donation at year-end. This is an exciting time where crypto is very high in valuation right now.
Yeah, I would echo that. So think back over the last few years, how you've been changing, how you've been accepting donations, whether you see the growth in donor-advised funds that continues to grow today, or many nonprofit organizations have set up Venmo accounts to accept donations. This is another growing channel of funding that you should also be taking. I can't see the growth of crypto, but the trends are that more people own crypto, which skews to a younger demographic. Suppose you're trying to appeal to the younger generations as they become more valuable to your organization's year-to-year support. In that case, you want to make it easy and lessen their barriers to support your organization.
One thing to add is that the places where people can currently spend crypto are pretty limited, so this is an exciting opportunity for nonprofits to take the appreciated crypto. It helps the donors for tax purposes and allows them to do good with their earned crypto.
When someone chooses to invest in cryptocurrency, does it make it much more likely they would be willing to give to you because already a bucket of funds that they've set aside as either experimental or expendable?
I know that there are many crypto-curious people out there, and a lot of people are investing. People understand that this is a volatile and risky investment, so if they saw that the crypto has done so well already, they might be willing to part with it and donate it to great causes.
If a nonprofit, especially at year-end, is interested in putting out a feeler or sending out an email to their donor base to see if cryptocurrency is something they should consider giving at year-end, how can they identify those folks?
Before even sending out a feeler, look at your file. The common demographic is a male, 38 years old, with income over $100,000. You can use a tool like GivingDNA to understand how many constituents and donors you have on file that fit that profile somewhere between 35 to 40 years old. How many are men or women? How many have a higher level of income? That's most likely what a crypto owner looks like.
Now, if you already accept crypto, you can also look at the people who give it to you because maybe your file's different from what the general population of crypto owners looks like. You can kind of take two approaches, recognizing, do you have a constituency that's large enough to make it worth your time that fits that common demographic of people that own crypto? If you have received crypto one way or another, look at who those people are and what they look like.
The report also found that over 70% of crypto holders are 25 to 44 years old, leaning towards millennials. We found that by just advertising or telling donors that you accept crypto, you could attract various people. There might be people who invested a little bit into crypto this year and saw it grow a lot, and we've also heard of nonprofits getting the attention of crypto groups. So enthusiasts and groups of individuals want to do good with the crypto they are working on.
What are some potential risks and considerations that a nonprofit should hold as they are also considering investing or looking into ways to accept cryptocurrency?
A disclaimer is that this is for informational purposes only. I am not a legal advisor or a financial advisor, so please consult your financial advisor for the latest details on this. But the number one risk would be volatility; the value of currencies can dramatically go up and down. For example, in early April 2021, the crypto market value hit 2 trillion for the first time and then lost almost 1 trillion by May. It is back up now, so you can see that this asset can go up and down very quickly. It'll be imperative for your nonprofit first to create a policy for cryptocurrency assets that covers whether to liquidate immediately or hold. That can be different depending on the coin and its perceived stability, or you could use something like an intermediary that can help convert to cash as soon as possible.
The second consideration is that there are a lot of regulations and flux. It might complicate your accounting a bit and your internal operations around receding. So specifically, the SEC and the regulators are still deciding many areas of how to deal with cryptocurrencies. Therefore, there ends up being a lot of gray areas. Even among institutions and brokerages, there are varying risk tolerance levels and accepted coins. Your nonprofit and board may consider these risks and determine that exercising fiduciary responsibilities is difficult if you decide to hold onto the currencies as an asset. However, there are other safer ways of accepting cryptocurrencies, like through an intermediary 501(c)(3). I also work at an intermediary 501(c)(3) called every.org. We help nonprofits process cryptocurrency donations for free, so that is one option; a donor-advised fund is another option.
I won't get into too much detail around the receding and the accounting, but basically, the Financial Accounting Standards Board has yet to issue firm guidance on how to treat cryptocurrencies. It's a bit unintuitive right now because big accounting firms say you should treat it as an intangible property rather than an investment. This means that your accountants should realize or ensure that they don't recognize unrealized gains or losses in your books. You have to take care of some layers of accounting and receding with your organization.
You recorded a pretty large amount of gifts last year given via cryptocurrency. What are a few stories of some nonprofits that you're seeing leverage this new technology?
On every.org, we're seeing over 1 million donated in crypto since launch in less than a year. We've seen the donations ranging from $4 to $500,000. Most are under $100, but the average comes out to $8,000 on the platform. We've seen some cool groups. So, for instance, Karma Koin is an Ohio-based cryptocurrency, and they want to do good with some of the money they are making from the cryptocurrency they have. They regularly donate to small and medium-size nonprofits through every.org. For instance, Working Dogs for Vets has an annual revenue of around $300,000. They received a $25,000 donation made originally through cryptocurrency before realizing that they could accept crypto support. Because they received it through every.org, they received a cash grant at the end of the day, which simplified their reporting.
Usually, when you receive cryptocurrency donations and sell that donation, you have to fill out an IRS Form 8282. Every.org takes care of all of that. For the small nonprofits that don't have a huge development team that could take care of all this or medium-sized nonprofits that don't want to take on the risk of accepting cryptocurrency, we can help them do that. We have seen many nonprofits generate their crypto donate button or link on every.org, just add it to their site and receive crypto support through every.org in that way.
How would a nonprofit go about getting a donation button and setting that up for their nonprofit in their year-end campaigns?
The easiest way would be to use an intermediary 501(c)(3) like every.org. If they go to every.org/crypto today, they can generate a donate button or link for their nonprofit. As long as it is a 501(c)(3) public charity in good standing with the IRS, you could receive crypto support starting today. Of course, if you want to hold onto the crypto or do something more fancy like accepting NFTs, then you might have to create a wallet through either a payments processing platform like Coinbase or BitPay that provides a custodial wallet for your organization or a different payments processor that is more nonprofit specific.
Every.org helps organizations that want to take a high-level stance with crypto, accept the support, and receive the cash at the end of the day. To answer your question once again, if some donor or a nonprofit wants to add crypto support to the different assets they accept at year-end, they can generate a button through every.org/crypto.
Just from what you've been able to see since launching in 2020, what do you think the future of just nonprofit and philanthropy is, especially for the millennial generation and Gen Z?
We have a social network for high intent givers, so we see that donors who regularly donate to various nonprofits sign up for an every.org account and maintain all of their donations in one place. At every.org, our mission is an accessible giving infrastructure to help every person and organization use technology for good. We are a 501(c)(3) nonprofit; therefore, we don't charge nonprofits any fees. We want to make sure that nonprofits can tap into new technologies like crypto without the fuss. You could receive support from every.org and receive a check in the mail at the end of the day without engaging with us, but for the highly engaged donors, and as you mentioned, millennials and Gen Z, we see that they are engaging much more digitally. So they are not expecting to go to in-person events.
A lot of them haven't established strict giving habits yet. They think about giving in causes and cause areas that they're passionate about, and they provide socially, so they get tips from their friends and their peers or experts that they look up to, and they give socially. That's what we wanted to emulate in every.org; we can look up by causes or search by whatever the experts recommend or what friends give. We wanted to give nonprofits a helping hand with fundraising so that they are not doing all the fundraising themselves. They could kind of tap into the viral loops that a lot of these younger donors are engaging in already.
I think that it's paying off because we have raised over $4.8 million for over 1,600 nonprofits across various causes, and we have $1.4 million in annual recurring revenue, which is well above the industry average. Around 40% of the donations are from recurring donations, and we want to continue that path. If we could help nonprofits raise more money using our free technology tools, that would be awesome.
Ryan, any thoughts to add?
Like other changes we've seen in the industry over the last year or two that has led to a rapid increase in innovation, this is something that you should kind of add to your toolset, not unlike how organizations have dramatically increased their digital presence and digital strategy. I think this is something that you should also consider, particularly because we're all trying to attract younger donors. This is something that we see younger donors are invested in. Because there are limited options for spending, it could be intriguing for them to support some organizations they care about by using crypto, so you should prepare for that and make it available to them.
I want to add that I'm happy to talk to any nonprofits interested in crypto. If you go to every.org/crypto, you could book time with us for 20 minutes, and we could talk about anything, from how to acknowledge crypto donations to the actual ways of accepting crypto. I know I mentioned every.org a lot, but of course, you could set up your wallet. I'm happy to walk that through with any interested nonprofits.
Conclusion: Every nonprofit should understand the potential crypto holds for facilitating donations. If you are looking for more information on how your organization can leverage it, contact Pursuant today. We would love to help you get up-to-speed with this new technology and start educating your donors or volunteers.