Key takeaways
- Cryptocurrency donations have grown significantly since Bitcoin’s launch, driven by tech-savvy donors. Millennials and Gen Z dominate this trend.
- Accepting crypto donations allows nonprofits to access global donors, attract younger contributors, leverage tax advantages for donors, and signal innovation and transparency.
- Nonprofits face risks such as market volatility, regulatory complexities and donor anonymity. These require transparent policies, donor tracking systems and effective asset management strategies.
- To comply with IRS rules, nonprofits must issue tax receipts, maintain accurate transaction records, and adhere to specific forms — e.g., Forms 8282, 8283. Crypto donations enable tax-efficient contributions.
Cryptocurrency has emerged as a major financial force over the past decade since the launch of Bitcoin (BTC) on Jan. 3, 2009. With Bitcoin reaching an all-time high of over $100,000 in December 2024, it suggests that crypto adoption has grown steadily. What started as a peer-to-peer digital currency for transactions has since expanded to payments for goods and services, and today, crypto is widely used for charitable donations.
When you accept cryptocurrency donations for your nonprofit organization, you get a unique opportunity to draw in younger donors who are technologically proficient and willing to support causes they can associate with. A nonprofit organization is an entity incorporated to achieve a specific social mission rather than to generate profit. It relies on donations, grants and fundraising to operate and achieve its objectives.
But this new frontier also brings technical issues and regulatory responsibilities, particularly when it comes to United States Internal Revenue Service (IRS) compliance. You have to learn how to receive crypto for your nonprofit and adhere to legal requirements before you can opt for crypto fundraising.
This cryptocurrency donations guide aims to apprise you of different aspects of receiving crypto donations, including the essentials of IRS compliance. It will help you leverage the benefits of digital assets for your nonprofit while staying on the right side of the law.
Who donates crypto to nonprofits?
As cryptocurrency adoption has increased, donations to nonprofits have surged. A 2024 report by The Giving Block reveals the average crypto donation exceeds $10,000 — 80 times larger than traditional cash donations. Millennials and Gen Z are leading the trend, with Fidelity Charitable reporting that 45% of millennial investors are aware of crypto donations.
Crypto whales, or individuals with large crypto holdings, take advantage of tax benefits by donating appreciated assets. Decentralized autonomous organizations (DAOs) further contribute by pooling funds for charitable purposes, often raising millions. Notable examples include Ethereum co-founder Vitalik Buterin, who donated $1 billion in crypto to the India COVID-19 relief fund, showcasing crypto’s expanding role in philanthropy.
Did you know? The number of crypto users is growing steadily in the US. In 2023, Pew Research discovered that 17% of American adults have been associated with crypto.
Why should nonprofits accept crypto donations?
Nonprofits are incorporating cryptocurrency donations into their fundraising plans for good reasons:
- Access to a global pool of donors: Thanks to cryptocurrency, nonprofits can access a global pool of donors via contemporary and efficient means. Donors may send money instantaneously using cryptocurrencies like BTC and Ether (ETH), regardless of where they are in the world, and without paying the hefty costs that come with sending money globally.
- Reach out to younger, tech-savvy donors: Nonprofits may reach a rising number of younger, tech-savvy contributors who favor digital currencies for international transactions. You can modernize your fundraising efforts and diversify your revenue streams by embracing this trend.
- Transparency: Blockchain-based transactions have an in-built transparency that helps in building donor trust. It also increases accountability on the part of the nonprofits.
- Tax advantages for donors: With crypto donations, donors can get potential tax advantages in some jurisdictions where cryptocurrency is regarded as property. It allows donors to deduct the full market value without paying capital gains taxes. You can also receive 100% of the donation tax-free.
- Signals innovation and adaptability: Being open to crypto donations signals innovation and adaptability on the part of nonprofits. You are able to position yourself as a forward-thinking organization ready to meet the evolving needs of your donor base while expanding the impact of your work.
Risks for nonprofits when taking crypto donations
Nonprofits considering crypto donations should be aware of several risks and challenges:
- Donor anonymity: Often, crypto donations lack identifiable donor information, making it harder to build relationships and secure future contributions. Also, a regulatory concern arises when the donor is unidentifiable, making it crucial to have a system in place to capture donor details for compliance.
- Market volatility: Cryptocurrency prices can fluctuate rapidly, posing a significant concern to a nonprofit. To mitigate potential losses, nonprofits may set up clear policies for managing such assets, similar to handling stock gifts, or convert crypto donations into fiat currency promptly.
- Regulatory issues: Regulations for the crypto space, including legal, accounting and tax frameworks, are still evolving. This necessitates adhering to best practices on your part.
- Anonymity: Some crypto projects like Monero (XMR) are designed to strengthen the anonymity of crypto senders and receivers. Depending on the jurisdiction where your nonprofit operates, you may want to take into account this aspect, as some regulators have banned such cryptocurrencies or discouraged their use.
By establishing transparent policies, performing due diligence and maintaining thorough transaction records, nonprofits can effectively manage these risks while accepting crypto donations.
Did you know? In 2013, Save the Children US became the first international NGO to accept Bitcoin. Until October 2022, the NGO had raised almost 75 BTC thanks to donations supporting children.
How to accept crypto donations
Your nonprofit organization can easily accept crypto donations, giving you access to a novel form of funding. This is how you can accept crypto donations:
- Pick a crypto wallet: To accept and hold donations, select a reputable cryptocurrency wallet that supports a wide range of cryptocurrencies. Web wallets are more convenient, while hardware wallets give you the highest level of protection.
- Refurbish your website: Include a “Donate Crypto” button on your website. Also, add crypto to the dropdown menu for donating via credit card, checking account, PayPal and more. Give wallet addresses or QR codes together with a clear mention of the cryptocurrencies you accept as donations.
- Integrate crypto donations with a payment processor: Collaborate with a payment processor such as PayPal or Coinbase Commerce, as it helps you keep donor information secure, which is important for attracting new donors and retaining existing ones. In addition, crypto payment gateways remove many technical obstacles to receiving cryptocurrencies and streamline payments.
- Train your team: Teach your team how to handle cryptocurrency transactions and ensure compliance with all legal and tax requirements.
Compliance with relevant tax laws for crypto fundraising
Here’s what donors and nonprofits should know about IRS compliance for crypto donations and fundraising:
For donors
To stay compliant, donors giving cryptocurrency for charitable contributions should be aware of how the IRS handles deductions for crypto donations. Cryptocurrency is governed by capital gains tax laws in the US, as the IRS views it as property. This means if you sell or exchange crypto for more than you paid for it, you’ll need to pay taxes on the gains.
This is advantageous for donors because when they give crypto donations directly to an eligible nonprofit, they can deduct the fair market value of the donation without having to pay capital gains taxes. To claim tax deductions for significant donations over $5,000, the IRS requires donors to submit a qualifying assessment.
For nonprofits
Nonprofits accepting crypto donations must also ensure they stay compliant with IRS regulations. When a donation is received, the nonprofit must provide tax receipts that include the donation amount in USD (as determined at the time of receipt) and a statement declaring no goods or services were exchanged for the donation. Due to the volatile nature of cryptocurrency values, it’s crucial for nonprofits to keep accurate records of donations.
If a nonprofit sells crypto within three years of receiving the donation, it must file Form 8282 with the IRS within 125 days of the sale. Failure to file the form could result in a $50 penalty per form. Nonprofits must also complete Form 8283 for donations over $5,000 to allow the donor to claim their tax deduction. While nonprofits aren’t required to assess the exact value of the donation, they must acknowledge receipt of it.
Did you know? The rising adoption of cryptocurrency has led to a corresponding increase in crypto donations. In 2022, Fidelity Charity donor-advised funds received $38 million in crypto donations.
Why do many donors prefer crypto for donations?
Many donors prefer cryptocurrencies over fiat because the tax benefits are substantial. When the value of the crypto assets increases, donors have to pay capital gains taxes when selling. But when they donate crypto to a nonprofit instead of selling it, donors can bypass the taxes entirely.
In the US, for long-term gains in the context of cryptocurrencies (assets held over 365 days), taxes range from 0% to 20%, while short-term gains are taxed at income rates of 10% to 37%. Direct crypto donations enable donors to legally avoid these taxes while potentially claiming a federal income tax deduction for the full value of their donation.
This makes donating crypto more cost-effective than selling it and donating fiat. As a result, nonprofits that are open to receiving crypto donations are likely to receive larger contributions, enhancing your fundraising efforts.
Philanthropy is another major reason for people to donate. According to research conducted by the Charities Aid Foundation, 96% of respondents felt a moral obligation to use their resources to assist others, reflecting deeply held personal values. The Giving Block’s Crypto Giving Tuesday initiative raised millions in cryptocurrency donations, which were used for disaster relief and defending human rights.
The Pineapple Fund, set up by an anonymous, generous donor, pledged to distribute over 5,000 BTC, valued at over $86 million at the time, to charitable organizations. By December 2017, the Bitcoiner had donated $7.550 million in Bitcoin to charities worldwide.
The future of crypto donations
The future of cryptocurrency donations holds significant promise as more nonprofits recognize the advantages of accepting digital assets. Crypto donations are attractive due to their potential for instant, borderless transactions and reduced processing fees compared to traditional methods.
Countries like the United States are leading the adoption curve, with platforms like The Giving Block simplifying the process for nonprofits. Organizations like Amnesty International and the British Red Cross are also embracing crypto donations in Europe.
Nations such as Ukraine have demonstrated crypto’s potential in crisis response, raising millions for humanitarian efforts. Countries with stricter regulations, such as China, lag behind in mainstreaming cryptocurrency donations.
With its growing crypto user base, India holds potential for crypto philanthropy but faces challenges due to unclear regulations and high tax burdens on digital assets.
Globally, the rise of crypto philanthropy depends on simplifying the donation process, educating nonprofits and addressing regulatory hurdles. Advancements in decentralized technology and partnerships between blockchain platforms and charities will likely drive adoption. As cryptocurrency awareness grows, particularly among younger, tech-savvy generations, the sector may see exponential growth, offering a new avenue for impactful global giving while addressing issues like transparency and tax efficiency.