NB Financial Health
The Age of Crypto-Giving: Why Cryptocurrency Will Become an Important Driver of Nonprofit Donations
In the summer of 2010 I met with the CFO of a prominent nonprofit organization to discuss a newly developed giving technology that my company had designed and would be launching in the near future. The technology enabled users to initiate donations with their mobile phones. My pitch was simple: Web and mobile technologies would quickly enable this nonprofit to increase its giving and donor engagement like never before. “Mobile and text giving are the future, and now is the time to take that step,” I confidently asserted.
Incredulous, the CFO quickly explained that an online giving strategy was probably not useful for them because they didn’t allow donations to be made by credit card. It would be another year or so before they would change their minds and dive into the deep pool of electronic donations. Today that organization has a $100 million annual budget and receives more than 70 percent of their donations electronically, via credit card and electronic funds transfer. Meanwhile, in the U.S. alone, total charitable donations rose to a new high of $410.02 billion in 2017, crossing the $400 billion mark for the first time.
A sea change for nonprofit giving began around that time, but it wasn’t obvious to many of the organizations it would impact. Massive change in most industries starts quietly. And in the nonprofit world, change is sometimes viewed as a step backwards. Now almost a decade later, a new technology promises to transform nonprofit giving in much the same way that electronic payments did. And just like in 2010, many organizations have yet to realize how this transformation will shape their work in the coming years.
The Age of Crypto-giving
As an active participant in both technology development and in social causes, I view the rise and proliferation of cryptocurrency and “crypto-giving” as one of the most important fundraising opportunities for nonprofit growth since the adoption of electronic giving.
When talk of cryptocurrency comes up in conversation, most people think of Bitcoin or Ethereum. But in reality, there are now more than 1,600 unique cryptocurrency tokens or coins spread across our globe, with an aggregate value of over $100 billion dollars. While the total value of crypto markets has dropped dramatically this year, some analysts and investors are still expecting this value to grow significantly from these levels over time. However, with crypto’s rapid rise and fall, the entire sector continues to be shrouded in secrecy, controversy and hyper price volatility.
Some of the underlying questions around cryptocurrency are understandable: After all, isn’t one point of cryptocurrency to avoid being identified when transacting? This element of blockchain-enabled transactions – along with the volatility of currencies like Bitcoin – has led to some justifiable suspicion of cryptocurrencies. Yet even though, to some extent, the growth of cryptocurrency has been opaque at best, I believe the technology is on the cusp of a brighter and more transparent future. And this represents an early opportunity for nonprofits to leverage cryptocurrency to the benefit of their mission.
A New Asset Class for Donations
It’s not very often that a new asset class is introduced into the nonprofit ecosystem. One of the greatest sources of capital for nonprofits has been individual givers donating appreciated stocks, which are then liquidated. Similarly, even with tokens trending down in value this year, there are still individuals who have significant gains in their cryptocurrency holdings, and who can receive tax benefits by giving some of their cryptocurrency to a 501c3. The IRS has classified cryptocurrency as property, which in some ways means the U.S. government treats it like an appreciated stock or in-kind donation. So if a donor has generated a gain on their cryptocurrency and would like to donate it to a nonprofit, it may benefit both parties. And while some high-profile gifts have been talked about in recent media, such as Ashton Kutcher’s gift of $4 million in Ripple’s XRP tokens to The Ellen DeGeneres Wildlife Fund, there’s a lot of lower-profile giving of cryptocurrency quietly taking place.
But is accepting cryptocurrency really worth the effort as a nonprofit? The answer to that question is based on simple economics: If there’s potential value and benefit both to givers and to the social causes they care about, then cryptocurrency clearly merits a nonprofit’s attention. In the early days of electronic giving, there were a lot of discussions about the security, cost and moral implications of receiving donations via credit cards – namely, the possibility that people might incur excessive personal debt in order to donate. Over time, the results of this form of giving have proven to be overwhelmingly positive, and credit card and ACH donations have become the norm. It’s now common for nonprofits to receive both large donations and micro-donations electronically.
As cryptocurrency becomes a ubiquitous part of our cultural fabric, it won’t be long before most individuals own some “crypto” for some purpose. It didn’t take long for us to turn “Google” into a verb: Technologies that provide value and utility now infiltrate our lives at a record pace. And as the speed of our communications and social networks continues to increase, we will quickly embrace cryptocurrency as a new tool for purchasing, saving and giving.
It’s often said that timing is everything, and I believe it’s time for cryptocurrency to grow up. But just as 2017 was the year of the cryptocurrency speculation bubble, 2001 was the year of the “dot-com” boom. Those of us who built and sold companies during that era remember the hype and excess well. And yes, today’s cryptocurrency movement feels a lot like those days. However, the investment and effort that went into fueling the rise and fall of those early dot-coms would eventually become the foundation upon which the next generation of Internet companies would be built. And while many businesses failed in that era, some have become global giants, such as Cisco, eBay and Amazon.com. These early companies clearly paved the way for relative newbies such as Uber, AirBnB and Facebook.
The Risk of Ignoring Cryptocurrency’s Potential
Cryptocurrency is still a baby, struggling to determine its place in the world economy. But that doesn’t mean we should ignore it. A lot of value can be generated in early market stages, and there’s little reason to believe that cryptocurrency will be different. As our society begins to find innovative ways to deploy cryptocurrency into our day-to-day lives, acceptance, regulation and transparency will replace speculation and opacity. As this process progresses and donations continue fuel the nonprofit engine, cryptocurrency will become an increasingly effective resource for funding and overall growth.
As I think back to my conversation with the nonprofit CFO in 2010, their decision to overlook electronic giving now seems foolish. However, in some small way they were onto something: They didn’t want their donors going into debt while funding their mission. It was a pragmatic approach to donor care. However, as designer credit cards with airline miles and money back benefits came to market, the demand from their donors grew louder. And as the donor impact of this giving became clearer, the worries began to fade away. By 2017, studies had shown that although 49 percent of all church giving transactions are made with a card, eight out of 10 people who gave to churches in the U.S. had no credit debt. Clearly the concerns about givers going into debt through charitable giving didn’t materialize.
With cryptocurrency, we are all attempting to understand how this new asset fits into our lives and the nonprofit missions we support. But unlike credit card debt, cryptocurrency is by and large purchased using fiat currency (like U.S. dollars). And, for those who have purchased early, the value of these currencies in some cases has appreciated greatly. Based on the public blockchain, there were almost 22 million bitcoin wallets in July (a number that has certainly gone up since then), and there are currently more than 49 million Ethereum-based wallets. Among these users, we expect that there are millions of individuals at present who have made substantial gains in cryptocurrency.
Some of these cryptocurrency holders care deeply about social causes. Why would we want to exclude them from using their gains to support our missions? With new giving tools on the way, nonprofits will soon have a number of safe and easy ways to implement cryptocurrency giving into their fundraising strategies. Companies like Alice and BitGive are providing platforms that enable donors to have visibility into a nonprofit’s spending ecosystem and to monitor the outcome of their donations. Also, new online tools and tokens are coming to market, such as the Engiven platform, where I serve as co-founder and CEO, which is scheduled to launch publicly this January. Engiven is a global, membership-based online platform that educates and equips nonprofit members around the process of receiving cryptocurrencies as donations. We hope that Engiven will also be able to provide free ENGV tokens – a new cryptocurrency we’ve created – to all of our nonprofit members (as permitted by law) after the company’s own Initial Coin Offering is launched. Additional tokens may also be allocated on an annual basis (again, as permitted by law), directly correlated to the global use and circulation of the ENGV token. Let’s hope that cryptocurrency grows up quickly so that nonprofits can leverage all of its benefits and continue to focus on the meaningful work of their missions.
NOTE: Engiven expects to launch its ENGV token through an SEC qualified Reg A+ ICO, which requires the following disclaimer: No money or other consideration is being solicited, and if sent in response, will not be accepted. No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. A person’s indication of interest involves no obligation or commitment of any kind.
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