The Cryptocurrency revolution has opened up a new way for charities to raise money, but the sector should be aware of the risks, according to an industry expert.
If you asked a charity a few years ago about their position on cryptocurrency – a non-government controlled, decentralised digital currency – they may have received a negative reaction. However, crypto philanthropy has gone mainstream, with crypto donations now commonplace and often much larger than cash donations.
The Giving Block, a crypto fundraising platform, reported that in 2021 it facilitated over US$69 million in donations to not for profits around the world, an increase of more than 1000 per cent from the year before. On average, the cryptocurrency donation was 82 times higher than the average online cash donation.
Despite the growth of crypto donations, many charities remain wary of the technology. Alex Wilson, co-founder of The Giving Block, believes that this reluctance could shut charities out of critical donor markets and have a negative impact on their long-term success.
“Non-profits are not only alienating an entire demographic of donors when they decide not to accept crypto, but they are also denying themselves the potential for major donations,” said Wilson. “Crypto donors are among the most financially educated people on the planet and understand the benefits of crypto donations. Charities often struggle to engage with crypto donors because they are younger and high-net-worth. Accepting crypto donations provides an opportunity to fundraise from this sought-after donor demographic.”
This is particularly pertinent in Australia, where the transfer of intergenerational wealth is expected to be the largest in the world, with $3 trillion to be passed on over the next 20 years. Several prominent Australian charities, including UNICEF, Habitat For Humanity and Rainforest Rescue, have already begun accepting cryptocurrency donations.
See more: Crypto’s the word – lessons from one charity’s journey into cyber donations
The Australian Charities and Not-for-profits Commission (ACNC) issued new guidance on crypto-assets earlier this year, labelling them as a “high-risk investment” that is “typically not appropriate for charities”. ACNC Commissioner Sue Woodward noted that “the risks connected with a charity investing in crypto-assets are greater and harder to manage than the risks connected with accepting donations of this kind”, and urged charities to develop their understanding or seek advice before making a decision.
See more: Do You need a policy in crypto for donations.
Wilson believes that the appetite for crypto is high, both in Australia and around the world, and will only continue to grow. “The crypto community has grown year after year and there is no reason to think that this won’t continue over the next decade,” he said. “Australian non-profits welcoming crypto donations is quickly becoming commonplace. Crypto donations are not limited by geography, so people can give to their favourite causes from anywhere in the world. We’re seeing the same giving trends in Australia as we are in the US and Europe.”
Charities should view cryptocurrency as a fundraising tool, not a magic bullet. Wilson recommends engaging with the crypto community via social media, as crypto donors are often younger and more tech-savvy. He also advises that charities convert all crypto donations received into dollars immediately to avoid volatility. However, he acknowledges that there is still a lot to learn about cryptocurrency and encourages charities to take a responsible approach.
“One of the most frequent things we hear from new clients is that they attempted to research the industry and quickly became overwhelmed by all the new terms,” said Wilson. “You don’t need to understand cryptocurrency in order to crypto fundraise, so try not to stress yourself out with the technical jargon.” More information on crypto-assets can be found in the ACNC’s guidelines here.