Did you know that more donations have been made in crypto than fiat? Crypto donation volume increased every single quarter in 2021. Find out how crypto is actually changing the world!
Had we written this article only a few weeks ago, the case studies would have been much less impactful. But in only a few weeks, crypto donations have gone from being a rapidly growing but overlooked trend to almost headline news in the industry. We are, of course, talking about the Freedom Convoy and the Ukraine Crisis.
Before getting to those, it is vital to analyze why and how crypto donations turned into a tsunami in 2021.
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The How and Why of Crypto Donations
The Giving Block is the biggest crypto donation solution on the market and provides the infrastructure to non-profits and charities to raise funds in cryptocurrencies. It is also the author of a highly insightful annual report on donating crypto. This report identified a couple of key trends in crypto donations in 2021.
Donation Trends in 2021
- Donation volumes surged by 1,558% year-on-year to $69,644,535.
- Donation sizes also went up by 236% year-on-year to $10,455.
- Donation volume increased every single quarter in 2021.
The total number of non-profits accepting crypto also skyrocketed by 900%. The average annual value of donation per non-profit increased from $42,000 to $69,644 (+66%).
Which Cryptocurrencies Donors Use The Most?
When Were the Most Crypto Donations Made?
The Rise in NFT donations
- #NFTuesday was a one-day celebration of NFT donations with participation from Sotheby's, Coindesk, Messari, and others.
- Hope for Haiti hosted an auction on an NFT marketplace.
- NFT project Woodies donated 73.8 ETH to Trees for the Future.
- Orangutan Outreach received donations from Bored Ape Yacht Club.
Why Are Crypto Donations Surging?
The Giving Block also identified several reasons why crypto donations exploded in popularity.
This would also explain the supply-side growth of more non-profit organizations accepting crypto. Donors take the initiative and offer cryptocurrencies while charities are looking to fill a gap caused by the pandemic. Crypto donations become the next logical step. Moreover, it firmly establishes younger people as a legitimate group of people that engages in charity work.
The Giving Block predicts that crypto philanthropy will grow consistently and sustainably in the future, regardless of the overall market conditions. The company even dares to predict that crypto "has the potential to become the most powerful philanthropic force on the planet in the years ahead." it has already made the transition from fringe to mainstream and the narrative will only strengthen, something that has already been proven true in the first two months of 2022.
Donations and Taxes
A key incentive to donate your crypto is lowering your capital gains tax liability. If you're lucky enough to have that problem, crypto charity is a tax-efficient solution since it is tax-deductible in countries like the US, the UK, Canada, Australia, and others. There are two distinct scenarios here for Americans:
- If you held the cryptocurrency for more than one year before donating, you will be eligible for the itemized charitable deduction for the fair market value of the cryptocurrency at the time of contribution.
- If you donate after holding the cryptocurrency for less than one year, you are still eligible for the itemized charitable deduction.
However, gifts and crypto crowdfunding do not count towards the deduction. Ideally, you want to donate long-term appreciated assets to deduct the coin's fair market value. Short-term appreciated assets also work since they lower the cost basis. Worst case scenario, you can always harvest losses in a losing position.
Pros and Cons of Crypto Donations
However, there are risks as well:
- Crypto is still comparably niche and, much more importantly, not easy to understand or handle for non-tech-savvy folks.
- Crypto is volatile, and non-profits may not want to become involuntary traders.
- Accounting standards and reporting of crypto is not that straightforward or simply unknown on the part of the organizations.
- Some may not want to accept anonymous donations.
Still, the data doesn't lie, and charitable organizations are clearly weighing the pros heavier than the cons.
Case Studies of Crypto Donations
The most fascinating part, though, are the real-world cases that have emerged over the last weeks and months.
This prompted crypto influencers to point out the benefits of crypto donations in this case:
Crypto donations are not only here to stay, they are here to grow. As we can observe in real-time, crypto can also help save lives instead of offering financial freedom. So expect the narrative around crypto only to grow stronger in the future.