Cryptocurrency and NGOs: Younger Crowds Are Now Interested in Charity
Cryptocurrency donations are elevating philanthropy and come from different types of demographics. When it comes to digital currency and charity, there are many differences that arise from traditional donations.
This method of giving is likely to be a long-lasting one in the nonprofit sector, and possibly transform philanthropy. Although the availability of cryptocurrency for charitable giving has already prompted new waves of young people to consider philanthropy, it may not be enough. While smaller charities have been able to compete for donations due to crypto’s accessibility, these are only the first steps. This is another hint that digital assets may soon become more deeply embedded in our daily lives.
Crypto donations are gaining popularity
As of the moment of writing, 2021 was the year of the largest crypto donations.
Fidelity Charitable is a nonprofit that advises donors about charitable giving. In 2020, approximately 45% of crypto investors gave to charities, while only about 33% of all general investors donated. In 2021, Fidelity Charitable has received $331 million in cryptocurrency donations, compared to $28 million in 2020. The Giving Block, a cryptocurrency donation platform reported that $69 million was the total amount of donations received in 2021. This is a huge 1,558% increase compared to 2020.
When making crypto donations, transfers can be easily performed from any country around the globe, which allows charities to have donors worldwide. Many international charities have begun accepting cryptocurrency donations:
- UNICEF CryptoFund
- Red Cross
- Electronic Freedom Foundation
- Rainforest Foundation
- The Giving Block
- Tor Project
- Save the Children
Crypto donations can help when NGOs are unable to obtain funding through other mediums. A famous example is WikiLeaks, which is banned from receiving funding through Visa, Mastercard, and PayPal. WikiLeaks now receives millions in crypto donations. Despite the unprecedented growth, cryptocurrency charity is still a new way of giving that differs from the traditional charity methods.
One of the main difference between traditional donations and crypto donations are the donors. On average, cryptocurrency users are younger than traditional donors to philanthropy. More than 60% of cryptocurrency users are younger than 40. The average age for crypto users in the United States is 38, while the average age for donors is 64.
United Way, an international charity, began accepting cryptocurrency in 2014. According to their analytics, the average user is between 45 and 65 years old and 80% of users are female. At the same time, the average age of donators of United Way is between 25 and 35 years, and 80% are men. This is a clear sign that the rise of cryptocurrency is attracting younger people to philanthropy.
What are the causes of this demographic shift? The answer is more complex and consists of:
- Causes published on social media
- Crypto transactions have low fees
- Tax deductions
- Crypto donations are anonymous
Social and humanitarian causes published on social media
Many cryptocurrency donations are made by tech-savvy young adults who want to support causes that receive more attention online. These donors might read touching stories and feel connected to specific events. Stories shared via Twitter about the Russia-Ukraine conflict have resulted in around $100 million in crypto donations for Ukraine.
Similar to the first wave of the pandemic in India, social media was a COVID-19 helpline that had global reach and helped with crypto donations. Vitalik Buterin (Ethereum founder) donated $1 billion to India’s COVID-19 relief program in Shiba Inu tokens. These tokens soared in price around the same period. He also donated about $5 million in ETH for Ukraine.
The Tor Project, a well-known non-profit dedicated to internet freedom and privacy, received 58% in cryptocurrency donations in 2021. This was due to crypto donors’ greater affinity for data privacy causes than other causes.
Because crypto donors might be confused about which cause or non-profit they should support, The Giving Bock recently introduced cause funds and impact index funds. These funds will assist donors in making informed decisions and could open up opportunities for them that they may not have otherwise considered.
The crypto donation platform allows you to fund causes that cover education, disaster relief, food, and the environment. Donors have the option to support a specific cause, rather than picking a non-profit organization. All non-profits receive an equal amount of the donation amount. This arrangement gives smaller non-profits an equal footing and ensures that the larger cause receives greater attention than bigger, more well-known non-profits.
Crypto transactions have lower transaction costs
For many reasons, donors may find crypto donations more attractive. Donations can be used to avoid capital gains taxes for crypto investors. There are also potential savings for donors as well as non-profits from transaction fees that traditional financial platforms require.
Crypto donations have lower transaction costs than credit and debit cards. Since most traditional donations happen online via a credit card, the processing fees vary between 2% to 7%. This fee is much lower for crypto donations.
A $2,000 wire transfer from the U.S. may add between $30 to $50 in transaction fees. Transferring the same amount via the Ethereum blockchain can cost around $15-20 in gas fees. But there are many other blockchains that charge much lower fees. The transaction time in crypto is also considerably less, while international bank transfers can take up to a few days.
Tax deduction for crypto donations
Another reason for making crypto donations is to reduce taxes. Tax-deductible crypto donations to NGOs are possible in the U.S., Canada, Australia, as well as New Zealand.
An investor can deduct the current fair market value of the crypto when he or she donates it directly. If the value of the crypto assets has appreciated over time, you can now deduct the value of the current price from your taxes, although you may have invested far less. If, however, you want to convert crypto to fiat first, you may have to pay capital gains taxes. These taxes can be as high as 20-30%.
Crypto helps to protect anonymity
It is easier for nonprofits to identify existing donors than it is to find new donors. Donors often prefer anonymity as they feel the pressure to give more. Donating large amounts may also require you to complete a KYC (know your customer) process.
Crypto donations help donors maintain their anonymity while they give millions of dollars. However, this anonymity offered by crypto may not last as many countries raise crypto regulations.
More than 1,300 charities accepted cryptocurrency donations in 2021. By allowing direct crypto donations, more young people are inspired to give. This shift will encourage smaller organizations to adopt crypto donations as well, and potentially disrupt the model of traditional donations.