Is Cryptocurrency Your Magic Bullet of Fundraising?
Will accepting cryptocurrency be the magic bullet that expands your fundraising capacity exponentially for now and years to come?
No.
But it can be a new stream of revenue and a welcome addition to the opportunities you place before your donors.
You can create another opportunity for donors to give by implementing a professional solution allowing you to receive the gift of cryptocurrency. Then, communicate to donors that you have a simple, safe and secure process to accept their gift.
Read on or watch our webinar on the topic here.
What is shifting in today’s giving trends?
Forbes published an article in mid-2021 that revealed some interesting trends and shifts in giving. Forbes saw the “dollars donated in America moving from the middle class to the wealthy, from income to assets, and from boomers to millennials.” They also saw philanthropy increasing the fastest among wealthy, asset-holding millennials and shifting away from the middle-class baby boomers fundraisers typically rely upon.
You may be familiar with the Pareto Principle, which in fundraising infers that 80% of your dollars come from 20% of your donors. But now, we are seeing evidence that even fewer donors are giving, but they’re giving more. We’re seeing the ratio to shift to 85% of your dollars coming from 15% of your donors.
Along these same lines, Forbes projects a greater share of giving will come from appreciated assets, rather than cash. For donors who have held appreciated assets for more than one year, they may find it can lessen their tax burden if they donate the assets rather than cash. This can include the more traditional assets like stocks, bonds and land, as well as the new exciting asset -- cryptocurrency.
As we’re thinking about the people who have these shifting major gift assets, particularly crypto, it may surprise you that it’s not all millennials who are holding cryptocurrency. The early technology adopters of Gen X, those born between ‘65 and ‘80, are also described as entrepreneurial and learned to use computers around high school. Many crypto owners fall into Gen X, as well as the Gen Y or Millennial labels.
So, what is crypto? And Bitcoin?
Bitcoin is a cryptocurrency invented -- or “deployed” -- by Satoshi Nakamoto, an anonymous programmer or programmers in 2009. It’s the oldest and largest of thousands of cryptocurrencies that now exist. There’s also Dogecoin, Ether, Litecoin and 7,000+ others. Learn more here.
Cryptocurrency is a fungible, digital asset that acts as a store of value and a medium of exchange. It being fungible means that one unit is interchangeable and divisible. A dollar bill is fungible in the same way. Like a dollar bill, a Bitcoin is identical to every other Bitcoin in usability and value.
Cryptocurrency is a blockchain technology. Blockchain technology is an overarching technology that has many applications beyond cryptocurrency, including real estate, voting, healthcare and decentralized finance. Definitive ownership records of this digital currency are stored on a blockchain based ledger -- a digital public ledger that records transaction information and enables direct peer-to-peer payments without a central bank or third party.
What are crypto donors like?
Our friends at Engiven, a platform that allows nonprofits to safely and securely accept cryptocurrency, note that many crypto donors are taking advantage of the tax benefits of donating appreciated cryptocurrency. As a result, much of the volume of donated crypto is made up of larger, tax and estate planning gifts.
These tax advantages may be driving some holders of crypto to become more philanthropic. The IRS classifies crypto as property. In most cases, if the asset is held for more than a year, the donor gets the full value of the donation to the organization and can offset their capital gains tax.
But tax benefits may not be the only thing driving crypto philanthropy. A study by the cryptocurrency exchange Gemini in 2021 found that 14% of the U.S. population owns cryptocurrency and 74% of those owners are men. The average cryptocurrency owner is a 38-year-old male making about $111,000 a year and the average crypto portfolio totals about $2,000. Philanthropy from these donors will be different from the larger holders of crypto, but still a possible avenue for donations.
How do you cultivate your crypto-holding donors?
Cultivate all your asset-holding donors by having strong gift acceptance policies in place related to appreciated-asset giving, wealth transfers, and bequests. Be confident in your ability to talk about these different types of gifts, including crypto, that can be accepted and, if possible, have some handy one-pagers that you can readily share.
At the end of the day, it’s up to the donor to decide how much they trust you. Many of these younger major-gift prospects have trusted financial advisors or even wealth managers, so having information about how they can contribute their assets ready to share can speed up your cultivation and solicitation process. If the donor is comfortable with you building a relationship with their advisors, that’s a great starting point too. The more trust they have in your process and ability to accept their assets, the better.
Building your cultivation toolkit with clearly written one-pagers of information about the different channels of giving will be instrumental in conveying thorough and transparent information. All of this comes back to building trust.
You can also build trust and enhance your donor relations by increasing the information about giving pathways on your website. If your donor has a way to give assets directly to you through a convenient and clear mechanism online that is simple, safe and secure, you’ll be in a great position to cultivate and solicit donors who are interested in giving to you through appreciated assets like cryptocurrency.
How do you accept cryptocurrency?
Nonprofits should choose a methodology for accepting crypto:
Self-custody via hardware, which requires a high degree of crypto savvy within your nonprofit;
Direct exchange with a platform like Coinbase or Kraken, which also requires more crypto savvy; or
a SaaS (software as a service) solution like Engiven, which includes a donor management platform and instant exchange for U.S. dollars to the nonprofit for a 4% fee. We suggest the SaaS solution for ease of use for the nonprofit and a safe, simple and secure way for cryptocurrency donors to make their gifts.
Regardless of the type of methodology you choose, accepting cryptocurrency is not a magic bullet for your organization, but it can be a new stream of revenue. You must first communicate your nonprofit’s case and motivate the donor to give. Then, by implementing a professional solution for receiving the gift of cryptocurrency and communicating to donors that you do have a simple, safe and secure process for receiving that gift, you create yet another opportunity for donors to give.
Kevin Wallace is president of CampaignCounsel.org.
