As the war between Russia and Ukraine rages on, crypto has become an integral tool for donors abroad to support Ukraine. The success of crypto-native fundraising campaigns in this regard reflects a broader trend, which has grown sharply this year, of crypto owners giving away their coins to support charitable causes.
Charities around the world are asking for donations in crypto to help Ukraine. endinga popular platform for crypto donations, it says has raised over $2 million for charities supporting Ukraine since the beginning of the war in late February. Another non-profit crypto platform, The donation block, has already raised $1.5 million in crypto donations and yesterday announced a campaign to raise $20 million in cryptocurrency for its Ukraine Emergency Response Fund, which supports a variety of accredited charitable groups including United Way Worldwide and Save the Children a website for the campaign.
However, it’s not just nonprofit organizations that want to use crypto as a fundraising tool. The Ukrainian government itself has already raised over $54 million in bitcoin, ethereum, tether, polkadot and other cryptocurrencies primarily to fund his military, according to a new site Details on its partnership with a number of major crypto exchanges. The Ministry of Digital Transformation of the Government of Ukraine led the effort Bring in donations via crypto, and the new partner companies will help convert those donations into fiat currency and send them to the Central Bank of Ukraine, the website says.
While the invasion of Ukraine has certainly acted as a catalyst for donors to give away crypto, the mechanism has grown in popularity with all kinds of charities over the past year.
Endaoment, which enables crypto donations to any US-based 501(c)3 nonprofit, saw a 100x increase in donation volume on its platform last year, from $253,000 to $28 million, the company said. The Giving Block also saw donations increase to more than $69 million in 2021 — a 1,558% year-over-year increase, according to its annual report.
All of this begs the question – why are donors choosing to give away crypto instead of cash?
Tax incentives are a key motivating factor, James Duffy, co-founder and CEO of The Giving Block, told TechCrunch.
“If you’re someone who wants to do something worthy of charity and you have crypto that is valued, that valued crypto is your most tax-stimulating way to donate,” Duffy said.
For US-based donors, there is a key difference between giving crypto to an established 501(c)3 organization and donating it to other causes, such as charity. B. A foreign government in the case of Ukraine. The former often results in a lucrative tax benefit for the donor, while the latter does not.
Monetary donations to a legally recognized charitable organization qualify as a tax write-off for donors, allowing them to reduce the amount of tax they owe by the amount they donate to charity. Donating assets like crypto or stocks can be even more beneficial than giving cash because it makes a difference another important tax incentive at the top of the depreciation.
If cryptocurrency holders sell their coins after they have appreciated in value to make a profit, they would typically have to pay up to 37% of that profit in capital gains taxes. If they donate the coins instead, they usually don’t have to pay any capital gains tax at all. The dual tax incentive explains why crypto owners, who typically want to keep as much of their digital currency as possible — hoping it will continue to appreciate in value — are actually willing to give it away to charities, rather than just donating cash.
Donor endorsed funds are a popular vehicle for wealth donations — they allow individuals to take an instant tax deduction when they deposit crypto, other assets, or cash into a special account that can appreciate in value over time. The account holder can ultimately use the funds in the account for charitable organizations at his own discretion and does not have to use all the funds immediately. loyaltyThe charitable giving arm of , Endaoment, and The Giving Block all offer donor-recommended funds that can accept crypto.
While tax incentives can sweeten the deal for donors to give away crypto, Duffy said it’s not the only motivator behind crypto philanthropy. Total Crypto Donors are more likely giving larger sums than donors who give stocks or cash, he added.
“If you’re into crypto, especially early in the crypto industry, you’re probably interested in just being on top and being a part of something that’s going to change the world,” Duffy said.
As with most trends in crypto, a sense of identity and community plays a central role in driving participation. Savvy charities capitalize on this cultural phenomenon, though most convert the donated cryptos they receive into fiat before deploying them.
“Any nonprofit that creates a space for crypto users outperforms the rest,” Duffy said.
Although some large nonprofits like Save the Children have been able to set up crypto donation programs due to their resources and size, many medium-sized and smaller charities have not pursued this option. Overall, crypto donations account for a tiny fraction of charitable donations – US charities alone receive an estimated total of over $470 billion of donors in 2020, according to Giving USA.
Nonprofits may be reluctant to get involved over concerns about crypto’s association with scams and fraud, a link that is noted by regulators, including US Securities and Exchange Commission Chairman Gary Gensler. Others simply don’t have the technology or infrastructure to successfully support the acceptance of cryptocurrency donations.
Small nonprofits without a solid internet presence sometimes think that accepting crypto can be a kind of “lottery ticket” for them, Duffy said. He cautioned against this mindset, saying that nonprofits without a large online presence should “stick to the basics” before building crypto integrations.
According to the annual reports of both groups, Ethereum was the most popular cryptocurrency used for donations on the Endaoment and Giving Block platforms over the past year. It overtook other cryptocurrencies to become the most donated cryptocurrency on both platforms last year, beating out previous favorites Bitcoin and Chainlink.
Crypto donating wasn’t just limited to coins, though — nonprofit NFT projects also gained prominence among donors. For example, popular NFT artist Pplpleasr used the Endaoment platform to donate the proceeds of her art to the Stand with Asians Community Fund. Combined, Endaoment and The Giving Block alone recorded nearly $20 million in NFT donations on their platforms, according to both companies’ annual reports.
NFTs in particular have the potential to unlock long-term streams of donations for nonprofits. Solana-based NFT marketplace Metaplex enables developers on its platform to support recurring royalty charities through their NFT sales through an integration with the Donations API startup To change.
Web3 creators see NFT donations as an opportunity to “leave a legacy through their work,” Change co-founder Sonia Nigam told TechCrunch.
“This is about the Creator’s benefit, not traditional philanthropy. The smart contract technology allows the effect to live in the product itself and then soften over time,” said Nigam.
“We will see NFT collections go live and they will set a goal [for example] from all second-hand sales, 2% goes towards the lifelong fight against climate change. Now, with every single resale, the original intention of the creator is never lost, which really excites him. And for nonprofits, developing recurring donation channels is always the number one goal.”
Although crypto donations have gained prominence over the past year, the rapid mobilization of funds to support Ukraine, particularly this month, could be a catalyst for the crypto community to support other causes.
Russian-born Ethereum co-founder Vitalik Buterin spoke about the potential unleashed by recent campaigns in support of the country Twitter Spaces conversation hosted by crypto investor Katie Haun’s team last week.
“I think a lot of people who are really core [the blockchain and crypto space] are in the room because they want to support freedom, support more democratic forms of organization, and generally support people’s ability to conduct their own personal and financial lives essentially peacefully,” Buterin said.
Watching these rights being violated in Ukraine has caught the attention of the crypto community, he said, attributing some of the heightened awareness to the fact that many individuals working on prominent crypto projects are Ukrainians themselves .
The success of crypto fundraising campaigns in support of Ukraine has shown that crypto “can be a very good medium to raise funds very quickly,” Buterin added.
Why web3’s wealthy are donating crypto instead of cash – TechCrunch Source link Why web3’s wealthy are donating crypto instead of cash – TechCrunch