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5 Reasons Why Nonprofits Are Embracing the Crypto Philanthropy Movement
8 min to read ✭ Here’s why Crypto Philanthropy is the most important new source of nonprofit fundraising revenue.
Cryptocurrency philanthropy has emerged as one of the brightest beacons of hope for the nonprofit sector. While the financial uncertainty caused by the pandemic found most nonprofits hosting virtual galas over Zoom as a sort of band-aid approach to fundraising, some organizations built an innovative, future-proof strategy by seeking support in the crypto and NFT communities.
Spurred on by the meteoric rise of the global crypto user base and the creative thinking of a small but growing number of nonprofits, crypto philanthropy has firmly established itself as a reliable fundraising revenue source. In 2021, crypto investors donated more than $300 million worth of cryptocurrencies like Bitcoin to charitable organizations.
The world of crypto philanthropy may seem intimidating, but as soon as most nonprofits receive their very first crypto donation, they can’t believe they didn’t think of it sooner. Here are five of the best reasons to say yes to accepting cryptocurrency donations.
1. Crypto Philanthropy Is An Innovation, Not A Fad
Nonprofits are right to be cautious when investing their time and resources into new ideas. But cryptocurrency is unlike most other fundraising trends that have come and gone in recent years.
Crypto Philanthropy Is A Financial And Technological Revolution
Crypto prices may be volatile, but the sector is built on a solid foundation. That’s why the industry is seeing astronomical growth in the form of user count, venture capital investments, top professional talent making the jump to “Web3,” and overall market capitalization.
What sets crypto philanthropy apart from the gimmicks and fads? These are just a few of the ways that crypto is truly an innovative, even revolutionary financial tool:
- Crypto assets like Bitcoin are bought, exchanged, and donated via a blockchain, which processes and verifies transactions from all across the globe quickly and securely.
- Blockchains are maintained by a network of decentralized operators, minimizing the likelihood of hacks to an entire blockchain.
- Because cryptocurrencies are not issued by central banks or controlled by traditional financial systems, they help millions around the world secure financial freedom who could not otherwise open bank accounts or have credit cards issued in their names.
Cryptocurrency’s technological underpinnings are a big reason why it has attracted 295 million users and created a massive market capitalization that hit $3T in late 2021. In other words, individual investors and business leaders alike see crypto as a stable bet in the long term, even if the individual assets experience dramatic highs and lows in price.
Nonprofits Fundraising Strategies Are Always Evolving
One of the most effective fundraising strategies is still sending white mail to donors, but traditional approaches won’t always be as successful as they once were. That’s why fundraisers have to strike a balance between tradition and experimentation.
Nonprofits have always fought to stay relevant and active in new spaces. In the 1990s and early 2000s, websites were all the rage. Next came email marketing, and social media platforms followed soon after.
Once seen as novelties, these innovations grew in value for fundraisers, and will continue to evolve over time (that’s why so many nonprofits are getting into Tik Tok, for example, or doubling down on Giving Tuesday efforts).
Cryptocurrencies have actually been around since 2009, and believe it or not, but a small number of nonprofits have been accepting crypto donations for more than a decade. Today, thousands of nonprofit organizations are starting to see the financial possibilities of fundraising cryptocurrencies.
2. Accepting Crypto Donations Means Diversifying Revenue Streams
It may sound obvious, but crypto donors can not only become a separate revenue stream from your cash-giving supporters, but their contributions can also be meaningful when considering your organization’s bottom line.
What’s important to realize is that the crypto sector now has a wide array of complex financial tools and services that help users maximize the value of their crypto investments. Knowing some background so that you understand the motivations of crypto investors can be incredibly helpful when approaching them for fundraising purposes.
Crypto Represents A Whole New Asset Class
When most people think of cryptocurrency, they think of Bitcoin first. That’s mainly because it is the first cryptocurrency and remains the most popular. But this asset, known to many as “digital gold,” isn’t the only digital currency in the crypto ecosystem.
Sector includes Bitcoin but also a whole ecosystem of blockchain-powered financial applications and their respective tokens, such as Ethereum and USDC. These tokens have a variety of different functions, from “stablecoins” that are pegged 1:1 to the US Dollar to governance tokens that allow holders to vote on technological changes to decentralized finance (“DeFi”) applications that they use.
What unites all of these assets is their ability to be bought and sold on crypto exchanges, similar to how investors trade stocks. These investors buy, sell, and swap tokens with the hope of increasing or maintaining the value of their investments. In many cases, these tokens can also be donated to nonprofit organizations that are equipped to accept them.
Crypto donations are often given directly to the nonprofit, but what happens to the donation varies widely, depending on the preference of both the nonprofit and the donor:
- Crypto can be automatically sold for cash and sent to a bank account
- It can also be held as an investment, much like a stock donation, to try to increase the value of the gift over time
- Crypto donations can be sent to a donor-advised fund and distributed later
The Value Of The Crypto Sector Is Skyrocketing
Something that began as an obscure experiment in computer science and cryptography has now become one of the fastest-growing asset classes in the world. In a short time, Bitcoin rose to become the best-performing asset of the past decade, beating out cash, the US Nasdaq 100, and gold. In the fall of 2021, the crypto market cap reached its current all-time high of $3 trillion dollars.
While not all crypto investors are millionaires or billionaires, nonprofit organizations appealing to donors should realize that the average crypto investor has a higher-than-average net worth, and an ability to make a positive difference through charitable giving. Here are a few statistics that can provide some more context:
- The per capita annual income for crypto users is $111,000.
- 45% of crypto users donate at least $1,000 to charity each year.
- The average size of a crypto donation processed by The Giving Block was nearly $11,000 in 2021
3. Young, Digital Native Donors Give With Crypto
One of the biggest anxieties nonprofits face is their aging donor base. The average donor is 64 years old, and many nonprofits can’t seem to sustain giving among younger donors. With no ability to rely on their most loyal supporters in the future, nonprofits are asking for support in new ways. Wise nonprofits that want to connect with young donors will also realize that there are other things to ask for besides cash.
Crypto Donors Are Young, Affluent, and Passionate
It’s estimated that one in five Americans have bought or traded cryptocurrency, and the overwhelming majority of them are Millennials, followed by members of Gen Z and Gen X. In fact, the average age of a cryptocurrency user is 38, nearly half the age of the average cash donor. Given the traits of their generations, these crypto users tend to be more altruistic on average, and passionate and vocal about the causes they believe in.
In part due to their investment choices and the overall growth of the sector, crypto users are on average more affluent than their peers. Some even prefer to get paid in crypto instead of cash. What this means is that crypto users are young but already have the giving power of major donors. Due to their age, they also have the potential to make significant charitable gifts for many decades to come. In other words, they’re the perfect donor demographic for nonprofits.
Inheriting Wealth, Investing in Crypto
Increasingly, many younger people would rather invest in crypto over traditional investments like stocks and bonds. They often cite inflation fears and declining trust in traditional finance as the main reasons for preferring crypto.
But while the trading preferences of Millennials may seem irrelevant to nonprofit fundraisers, consider this: over the next few decades, Millennials are set to inherit $30 trillion from their parents, in what will be the largest generational wealth transfer in human history.
By accepting cryptocurrency donations now, your nonprofit will be better positioned to collect donations from Millennials that are driving the global embrace of crypto assets and crypto philanthropy.
4. Crypto Unlocks NFT Charitable Fundraising Opportunities
One of the most exciting aspects of Crypto Philanthropy is NFT fundraising. A non-fungible token (or “NFT”) is a blockchain-based store of data that represents the ownership of something, commonly an original artwork such as digital art or music. Here are some of the more common ways that nonprofits are raising millions of dollars with NFTs:
NFTs Make For Exciting Charity Auctions
Just like in a traditional art auction, NFTs can be auctioned off to the highest bidder. In this case, buyers browse NFT marketplaces like OpenSea and LooksRare, and pay for their collections in cryptocurrencies like Ethereum and Solana.
When charities work with an NFT artist to run a charity auction, it’s an exciting way to raise visibility among crypto users for an important cause. Even corporate brands like Stella Artois are helping their charity partners tap into the NFT craze.
NFT Creators Can Earmark Royalties For Charity
In other cases, NFT creators are keener to approach a nonprofit organization and ask if they are interested in receiving direct donations from the creators themselves. In some cases, the project creators will simply want to make a one-time donation.
Increasingly, charity-minded NFT creators are using “smart contracts” to automatically allocate a portion of their proceeds from mints and secondary sale royalties to a charity of their choice. When an NFT project launches, creators will set a price to generate or “mint” each item in their NFT collection, and prices for those pieces are set in the aftermarket based on supply and demand. Donating via smart contract ensures that their generosity can be a form of perpetual giving, somewhat similar to a monthly donation program.
No matter how your nonprofit uses NFTs in its fundraising efforts, the key steps include:
- Finding an NFT project to work with
- Determining what kind of fundraising strategy you’ll use
- Setting a financial goal for your fundraiser
- Choosing the right NFT platform or marketplace
- Promoting your NFT fundraising efforts
5. Institutional Crypto Philanthropy Is On The Rise
As cryptocurrency becomes a more established asset class and the amount of wealth locked up in crypto assets increases, institutional crypto giving is expected to grow.
Crypto “Whales” And Wealth Management
There is already an increased demand for wealth managers, tax advisors, and gift appraisers knowledgeable about how to maximize the value of cryptocurrency investing and philanthropy. Simultaneously, more and more crypto tax software products can factor in complex crypto trading events. Those who need services and products like these include the crypto “whales,” those who hold significant amounts of a cryptocurrency, as well as ordinary investors.
Crypto users are also realizing that donating cryptocurrency can be more tax-efficient than donating cash, but may need help maximizing tax savings based on their personal financial situations. As the money management industry pivots to accommodate crypto investors, the nonprofit sector should expect to see more major gifts in some form of cryptocurrency.
Crypto In Donor-Advised Funds
Donor-advised funds (DAFs) are one of the fastest-growing methods of charitable giving. DAFs have become popular in recent years because small-gift donors can maximize the value of their gifts and enjoy several tax benefits.
With DAFs, charitable gifts can appreciate in value and payout over the course of several years. In response to the needs of the changing charitable giving landscape, DAF program managers are starting to enable the contribution of crypto assets to DAFs.Crypto-enabled DAFs can change the giving landscape for endowments, family trusts, and more.
How to Break into Cryptocurrency Fundraising
Nonprofits don’t need to go full speed ahead when they begin accepting cryptocurrency donations. Your nonprofit doesn’t need to invest extraordinary amounts of time or money into a fundraising strategy to receive donations.
Instead, starting to engage board members, CFOs, and development directors, and having conversations with current donors can help jumpstart your crypto fundraising journey. Once your nonprofit is equipped to accept cryptocurrency donations, it can even begin a more passive effort, but will effectively open the door to exciting new fundraising possibilities for decades to come.
How to Start a Cryptocurrency Fundraising Program
- Talk to your leadership team and current donors about crypto
- Find a crypto fundraising solution that is secure, compliant, and easy to use
- Understand the tax benefits for crypto donors
- Decide if your organization will auto-sell or hold crypto donations
- Learn about fundraising opportunities with NFTs
- Publish your cryptocurrency donation webpage
- Share the exciting news with your supporters!