POST WRITTEN BY
Dr. Gloria Horsley
- What You Need To Know About Using Cryptocurrency In Your Nonprofit
is Founder of the Open to Hope Foundation , an open community where people can find hope after loss.
Gloria Horsley , Forbes Councils
In other articles, I’ve talked about how adding more payment options has helped my organization. By including mobile and online payments, we’ve seen an increase in donations across our donor demographic. This includes praise for direct debit, debit and credit cards and mobile payment tools.
Now, with the advent of digital currency, also known as cryptocurrency, we began exploring the potential for adding it as a new payment option in our fundraising efforts. Some nonprofit foundations like Beam and the Royal National Lifeboat Institution started accepting Bitcoin as early as 2014. And in 2017, there were stories of more nonprofits starting to migrate to this payment-acceptance method. With numerous nonprofits already using cryptocurrency, it seemed to me like there should be a wider adoption.
With the spotlight on cryptocurrencies like Bitcoin, with a value that has skyrocketed as well as experienced roller-coaster pricing, it led us to tally up the benefits and risks of using cryptocurrency in our nonprofit. Here’s what we found.
Lower Processing Fees
One of the issues with accepting debit and credit cards is the fact that we get hit with high processing fees. While we may have increased our number of donors with this payment method, the fees eat into what we could get in terms of donations. With cryptocurrency, there are no banks or credit card companies involved in the transactions. That means a much lower processing expense.
Sites like Coinbase and BitPay make it easy to accept this type of currency and offer very low transaction fees. These sites have been verified as legitimate and safe ways to accept donations with this currency. In fact, Coinbase has helped nonprofits by allowing them to accept a certain amount of cryptocurrency with no transaction fees .
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Fast, Efficient Transactions
Because there are fewer people and processes involved, cryptocurrency transactions are fast and efficient. You won’t be dealing with paperwork or extra steps just to get the money. With traditional payment processes, it can take three or more days to have the money in your account. The timeframe could be even longer when dealing with an international payment.
The quick transfer of cryptocurrency results in donations delivered faster so you can put that money to work. This can be a great help to getting started on a project or maintain good cash flow in your nonprofit.
Easier Access To International Donors
Because so many countries are interacting with each other online and through social causes today, we’ve experienced considerable growth among our international donors. The grief foundation that I run is something that resonates with people all over the world. But even accepting credit card payments from international donors was difficult due to the exchange rates and additional fees related to these transactions.
In exploring digital currency like Bitcoin, we saw cost-benefits and conveniences for both our foundation and our international donors. There is no need to deal with currency exchange rates that often fluctuate or the additional fees associated with international credit card payments.
Some Other Considerations
There are other aspects of cryptocurrency that give us pause. First, there’s the fact that some types of cryptocurrency seem to disappear while others like Bitcoin have been very volatile in terms of their value. Cryptocurrency value is based solely on supply and demand, so there can be some serious fluctuations that may be cause for concern, especially if the value were to plummet. When the value decreases, so does the amount of donations we have to help our nonprofit.
Second, there is the question of what it means on a tax basis. For example, the IRS classifies virtual currency as property. That means that we must classify any cryptocurrency donations as non-cash gifts. Therefore, no value is assigned to those donations. However, the donor must document the value of their donations made by cryptocurrency. Since there is still no real guidance on how to report or account for these donations, there is some uncertainty involved in accepting this type of currency.
Third, there is some risk involved due to the fact that cryptocurrencies are anonymous and uninsured. Also, they’re technology dependent. This means that should anything go wrong, there is no recourse or direct way to get the money back. This is where traditional funding is better because you have a bank insuring the funds, and there is a greater sense of security that the funds will not be taken from your account. Or, should your account get hacked, you would get the money back — whereas cryptocurrency would be gone forever. This means you’ll need to know and implement all of the security measures necessary.
For these reasons, I believe it may be best to continue observing how cryptocurrency evolves and how it is accounted for before adding it as a payment option for donations. Consider your own risk-acceptance levels and discuss the idea with your board and donors to get their opinions. Cryptocurrency has the potential to increase your donors’ giving, as it provides a new and easy donation method, eases the hassle of international payments and decreases the processing fees your organization must cover, but there are plenty of things to consider before adding it to your campaigns.