By Larry Wright
Cryptocurrencies have changed the world of money we interact with; now, your money is not present in a bank account that you can access from the comfort of your home; it is much more secure and is covered by the principle of decentralization and the security rendered by blockchain technology. You might be wondering why there ever was a need to develop such a technology, wasn’t these standardized and conventional modes of finance enough?
The answer is no; sooner or later, the conventional world of finance is going to chip in and would want to merge with blockchain technology and decentralization because it is not as competent as decentralized finance, where your money is located on private ledgers that no one has access to, but you are holding a private key and all the authorization ever required for the purpose of gaining access. Apart from these security aspects of decentralization and the crypto market, you would definitely enjoy the anonymity that comes with it.
The first thing that you would notice that is different about the crypto market from other conventional markets is the fact that all the transactions that you ever conduct on the decentralized space, whether it is about sending money to a dedicated user or receiving crypto from some other random user no one will be able to ever trace back those cryptocurrencies neither the amount nor the timeline through which the exchange took place.
It is an extremely private network that allows you to have all the control over your money. Another great benefit that you can enjoy with the crypto market is that there are no intermediaries whatsoever that you have to deal with in the context of getting your transactions validated; it means that no one knows about your business, and you can explore the crypto market to its fullest extent in a manner that suits your needs.
Introduction to Crypto Donations
Philanthropy and making donations is a big part of the centralized financial world people who are wealthy and have the heart to help out the needy are often engaged with donations and other such activities. These donations are primarily made to the organizations that are engaged with helping the poor and the needy, providing educational, health, and or living services to those people. Sure some people do engage with donations out of the good of their heart, but some have other purposes involved.
Many people who engage with constant donations are doing so just to make their money tax free, they might have a setting with those corporations or organizations who do the charity work that they will wire them a certain amount of money, and when they receive it, they can take their share for helping them out in the process of making the donation and tricking the government into believing that this whole money was bound for charity work. And most of them do get away from paying taxes this way.
With cryptocurrencies, the whole thing is pretty different; you can donate to these organizations and charities in the form of cryptocurrencies, and the process is simpler, faster, and much more articulated, but at the same time, you can’t reverse the transaction or have the charity whom you are interacting with initiate a reverse transaction after taking their cut for helping you out with the process. Bitcoin, Ether, and various other cryptocurrencies can actually help your donation journey if you are really interested in using crypto to do just that.
History of Crypto Funding
Suppose you’re thinking that you were the first one to have this brilliant idea of making crypto-related investments into a proper fund that is targeted at philanthropy and charity work, then you are not the first. December 2017 marks the initiation of the pineapple fund, which was developed by an anonymous crypto investor by the name of Pine; it was an experiment to check the validity of cryptocurrencies in the world of philanthropy.
He used $55 million worth of Bitcoin tokens and donated these in segments into 60 different charity organizations, which were focused on a myriad of elements, including mental health, environment, tackling cardiology, and various other such goals.
You would think that the whole crusade stopped right then and there, and no one ever wanted or even tried to give away their crypto in the form of charity, but that is not the case. Since then, giving to charity via crypto has become an immensely popular choice for corporates and individuals alike.
Today, crypto has become the mainstream element of finance, and because of that, many organizations over the globe that cover various financial elements and attributes all the way from automotive to manufacturing and from charity to online learning have started to accept crypto.
You would be glad to know that two of the biggest charitable organizations around the world, the ‘Red Cross’ and ‘United Way’ now accept crypto payments as a form of charity; not only these two but several other organizations have started to list various cryptocurrencies that they are compatible with so that people can give them out as charity.
UNICEF was the first to announce that it is the primary UN organization that has begun accepting crypto-oriented transactions via a dedicated crypto fund that was designated for that specific element. Since the launch of this fund, UNICEF has received both Bitcoin and Ether, totaling the overall contribution up to $5 million.
You can check out Daffy, which is an online service allowing you to locate the nearest possible nonprofit organization and charities that are accepting donations both in cash and crypto. There are a million and a half different organizations that are supported by this platform, and you would be able to make direct donations to any of these either in cash or crypto.
You can’t help but notice that making charitable contributions, especially from one country to another, has become so quick and reliable that you don’t even have to pay highly demanding transaction fees and on top of that, the whole process has become much easier and efficient and at the same time equitable which was definitely not in the past. Many people just refrain from the thought of giving their money to charitable organizations because they have to go through so many organizations that were involved in the process and an extensive process on top of everything else.
They had to pitch in the whole thing to IRS or any other relevant tax authority and let them know that they are giving away some of their money to charity and they should not deduct tax from it, and other than that, they had to announce the provision of this specific amount of money that was bound to a charitable organization to that particular platform in advance so they can accept it and not return it back. But since the dawn of decentralization and involvement of cryptocurrencies, the whole process is just a simple click away.
Private Nature of Cryptocurrency
It has already been established before that cryptocurrency is extremely private and anonymous on is a huge help as it has addressed issues that are associated with the privacy of the users and the data that they have at hand, which is why it has become extremely relevant to donors as well most of the donors who want to make adjustable contribution don’t want their names or any other association with the donation itself. They are constantly under the fear of having their cover of anonymity blown.
According to a survey conducted in 2021, people do have issues with how their data is recorded, interpreted, and validated by financial or other private organizations; in just a few simple words, it means that people are concerned with the general handling of their data, and they are not extremely happy about how they are being exploited.
If you have plans to donate crypto directly to a particular organization, then it can protect your privacy as well as your personal information because of the factor of the crypto market. Not only this, but you would also be able to hide the fact of just how much crypto you are going to donate and in which particular fashion. This can result in you, the donor being able to access multiple organizations out there and helping them out in their struggle to make amends in society.
Crypto Enjoys Tax Freedom
It might not sound feasible at first because of the decentralized nature of cryptocurrencies and the centralized propelling of stuff with taxation authorities and other validating personnel, but if you choose to donate in crypto, then you can enjoy certain tax-oriented benefits. First of all, let’s say you bought Bitcoin back in the day, that was $1000, but in the latest market, the price is over $3500 because Bitcoin has increased in overall value and sentiment.
Now, if you decide to donate the full amount of crypto, again, which points to an IRS-recognized organization that accepts cryptocurrencies, there are potentially two ways to do just that.
The first thing is that you sell all of your Bitcoin at the present face value of the asset and then donate your amount to that particular charitable organization in the form of dollars. But if you want to do that, you will be liable to a long-term capital gains tax valuation almost at 20% and then some that eventually is subjected to further local taxation and then you can give it away to that specific organization.
The sub-tax or the local taxes are still not included in the long-term capital gains tax if you were thinking about it; at the end of the day is not a very profitable scenario for you.
The next thing is that you don’t convert your cryptocurrency or Bitcoin into another Fiat currency, for that matter and donate it directly; this event will become tax-deductible and will even mark your contribution towards that particular charitable organization that was the recipient of your charity.
If you make a direct donation in the form of cryptocurrencies, may it be Bitcoin or any other major cryptocurrency that is recognized by those charitable organizations, then you might not have to pay the capital gains tax at all; not only this, but you will also gain subsequent advantages with the IRS or your own particular taxation authority which is nothing but music to ears.
Charity Organizations Can Process Crypto Donations More Easily
Another benefit of donating to your charities through crypto is that the organizations in question don’t get to have a hard time with the IRS or any other taxation authority for that matter when it comes to processing those donations and making them part of their network. According to a survey conducted back in 2020, about 63% of people who regularly donate to those charitable organizations prefer to do so with the help of a debit or credit card.
But these kinds of transactions can top up to 2.5% or even a larger amount when it comes to the fees that are going to be deducted. This means that the actual donation that you are sending will be reduced to a more feasible number because the company for your debit or credit card is going to deduct a lump sum amount of money from your original donation.
Let’s say if you’re donating $2000 to a charitable organization via your credit or debit card and a transaction fee of $150 is incurred, then eventually, the final amount which will land into the account of that particular charity is going to be $150 less, this is the money that you have spent on making sure that your transaction gets validated and the money actually reaches those charitable organizations.
According to a survey, if you allocate your donations through crypto, then the overall amount which will be deducted for $2000 is not going to be any more than $17.00, and that is a huge difference when it comes to either donating by Fiat currency or crypto.
At the end of the day, you want what is best for the charitable organization you are interacting with, and the best course of action for them is to have as many donations as they can get their hands on and make it easier for them to process all that money without coming under the eyes or speculation IRS or other taxation authorities.
Crypto Donations via Stablecoins due to Less Volatility
Volatility is an innate quality of the crypto market and is associated with cryptocurrencies and any and everything that is associated with decentralization and blockchain technology. Whenever you are buying a cryptocurrency for the sake of turning a huge profit, at the end of the day, when prices are going to soar high, you might not be able to achieve that goal of yours because of the extreme volatility that the crypto market exhibit.
The same thing is true when you give away cryptocurrencies as a form of a donation to those charitable organizations; because of volatility, they might not be able to make the best use of that particular donation because the prices are being slain across the board and they were not able to fully grab this opportunity that you have provided them in the form of your donations through cryptocurrencies.
But there is a catch here; you can convert your cryptocurrencies into stablecoins which are like a hybrid approach present between the centralized and the decentralized world of finance.
Providing with the security metrics of decentralization and, at the same time, the standardization and legislation of a decentralized world. These assets are like holding something that is the best of both worlds and being able to communicate your donations to those particular charitable organizations in the form of stablecoins.
There are some organizations out there who accept stable coins as a mode of payment or donations other than cryptocurrencies and the Fiat currencies, and you can get in touch with them beforehand to make sure that when you send those stablecoins over, they would be able to take full advantage of these.
The best approach that you can have here is to make sure that whichever charitable organization you are thinking about investing your money into actually accept cryptocurrency-oriented donations; otherwise, your whole trouble is going to be for nothing. Most charitable organizations might say that they do actually accept cryptocurrencies, but they are reluctant to have huge volumes of transactions allotted to their name and hence can’t accept a significant portion of donations.
You have to go to a hybrid approach which means that you have to give them donations part in crypto and part in Fiat currency. It might not sound like a professional approach, but they have their hands tied and can’t do anything about it; that is why it is important to check first with the organization or their charitable administration to make sure that there are no loose ends at all and you are actually making the right decision going forward with the crypto oriented transactions.