Everything You Need to Know About Using Cryptocurrency in a Nonprofit
The thought of using cryptocurrency in a nonprofit would make many balk, but there are ways to do it without too much risk.
There are a lot of things that people tend to associate with the term "cryptocurrency."
Some call cryptocurrency like Bitcoin the "new criminal currency." Others hear the word "crypto" and think about Bitcoin wallet scams. Even more hear cryptocurrency and start talking about new ways to invest in crypto without actually owning coins.
As plentiful as the terms may be that we associated with the cryptocurrency boom, one term we never really associate with crypto is "nonprofit." If anything, cryptocurrency seems like it's all about profit!
We all have heard about companies that have used cryptocurrencies to get funding for their businesses or new technology, but using cryptocurrency in a nonprofit is unheard of.
However, that's not to say that it hasn't happened. If you want to try to use crypto in your nonprofit, you're going to have to be careful and take a note from the following groups that have done it already.
The best way to start using cryptocurrency in a nonprofit is to accept donations in the form of crypto.
Most nonprofits that have dabbled in cryptocurrencies have done so by accepting Bitcoin donations. Some, including the Royal National Lifeboat Institution and Beam, both accept Bitcoin donations—and have been doing so for almost five years!
Considering how many retail stores accept Bitcoin these days, it should be relatively easy to find a service that will facilitate that for you. We suggest trying Square.
It's no secret that Bitcoin wallet hacks have caused major losses for investors. When you're a nonprofit, you really cannot afford to lose your crypto. If you're using cryptocurrency in a nonprofit and lose it to a hack, it could look very suspicious to potential donors.
We suggest using Xapo, the only fully insured cryptocurrency wallet on the market for your vault. Should anything happen to your crypto, you will be able to get the money back thanks to their insurance policy.
The benefits of using cryptocurrency in a nonprofit make it worth considering.
If you think about how many risks there are when you want to use cryptocurrency for any kind of fundraising, it's hard to imagine that anyone would want to even bother with adding cryptocurrency to a nonprofit's fundraiser.
However, the big draws that make it worthwhile are the low processing fees when compared to credit or debit donations and the high volatility of the market.
By having lower transaction fees, nonprofits get to keep more of the donations. By having a volatile market, it's very possible that nonprofits will be able to exchange the crypto for more money than it was initially worth.
Most people who are in the cryptocurrency sphere love to see people using digital currencies to support good causes. It's proof that blockchain technology can change the world for the better, and works as a great way to get more transactions to occur.
Coinbase, for example, waived fees for nonprofits that want to use its exchange to accept cryptocurrencies as donations. It's a good thing to know that exchanges will support your nonprofit, isn't it? It's one of the many reasons you should set up a Coinbase account right now.
The speed of transactions also makes it a good match.
One of the more understated perks of using cryptocurrency in a nonprofit is the speed at which the nonprofit can use the money. Many exchanges offer near-instant transactions. Most debit and credit card service companies, on the other hand, will ask nonprofits to wait for at least a couple of days.
The instant transaction speed would allow almost any nonprofit to get a better cash flow, improve their ability to budget, and make better financial moves. This is a huge deal for nonprofits that are just starting to have major projects unfold.
Could you imagine how much of a hassle it would be to donate money to a nonprofit that isn't in your country? In a lot of cases, you would have to exchange your country's currency for the nonprofit's fiat money.
You might also lose track of how much you donated to the cause, may have to eat a fee in order to send money there via credit card, or deal with similar issues. It's easy to see why international donors might not want to get involved.
Cryptocurrency removed a lot of those speed bumps and also keeps the frame of reference stable. This is why a lot of nonprofits have been able to get more international donors after they allowed crypto donations.
For example, UNICEF Australia actually allows cryptocurrency donations and mining offers as a way to get more cash. This has proven to be incredibly beneficial for them.
The bad news is that using cryptocurrency in a nonprofit can be risky, even if it's not due to hackers stealing coins.
Cryptocurrency's value, for the most part, really isn't backed by anything except for supply and demand. If, for some reason, cryptocurrency fails, then charities will end up seeing all the donations they received become worthless overnight.
Many digital currencies have died out due to a lack of use or bad press. If you receive cryptocurrencies that flop, all the value you had in them dies with the coin.
Using cryptocurrency in a nonprofit is still considered to be somewhat dodgy, especially when you're talking about the IRS. News sources have pointed out that the IRS has gotten particularly interested in tax income from cryptocurrencies now that this form of investing is in vogue.
Legally speaking, the IRS considers cryptocurrency holdings as property. When you sell or exchange crypto, the IRS will want to get a portion of your profits. If you want to use crypto in your nonprofit, you will need an accountant who can handle it.
Another thing you may need to remember is that crypto is anonymous and uninsured.
At first glance, this doesn't seem like a bad thing, but it is—especially for nonprofits.
People often will donate to nonprofits in hopes of getting tax write-offs, but when the form of donation they choose is anonymous, it'll be harder to prove they did it. Charities may have to work harder to ensure that they get better records of donations via a specialized platform.
Additionally, the "uninsured" aspect means that if anything happens, the crypto will disappear for good and you will not have an easy time getting it back. This is what often keeps groups from using cryptocurrency in a nonprofit manner.
Using cryptocurrency in a nonprofit is still a relatively new concept. There's no right or wrong way to do it and even major nonprofit groups are finding new ways to use blockchain currency in fundraising. Don't be afraid to try something new; you never know how it'll turn out.
AidCoin, for example, is an ICO that's developed for the specific goal of being used for charity. Will it work? Quite possibly—but we'll have to wait to find out.