Embarking on the Cryptocurrency Philanthropy Journey:
This blog aims to enhance the charity board, management, fundraising team, and finance departments’ awareness of the developments in the cryptocurrency philanthropy space. While there are no clear regulations, charities have to prepare for the adoption of cryptocurrency philanthropy and ensure that their organization has adequate communication and infrastructure to stay relevant to the trends and cater to the new group of donors and supporters. As of now, cryptocurrency donations are not tax-deductible in many jurisdictions like Singapore. Hence, to start off, charities should request their donors to convert their cryptocurrency donations into fiat currency and bank transfer within one business day. This ensures that the funds are readily accessible to support the organisation’s humanitarian initiatives while the donor can benefit from the tax deductions for their donations. It is however, good to note that there is growing trend of tax-deductible cryptocurrency donations in countries like the USA, UK, Canada, and Australia.
Growing trend of Cryptocurrency Philanthropy in Singapore:
Singapore, known for its technological advancements, has seen a growing interest in cryptocurrency philanthropy. As of 2023, Singapore is ranked second place in crypto hubs 2023 list by CoinDesk. In a study done by Techwire Asia, a considerable 37% of Singaporeans are already paying or are interested in paying in cryptocurrency. This may indicate a future boom in cryptocurrency philanthropy when there are more dedicated charity platforms that accept cryptocurrencies.
Several charities and platforms in Singapore are pioneering cryptocurrency and Non-Fungible Tokens (NFT) donations and the use of blockchain technology, recognizing their potential to engage tech-savvy donors and streamline giving.
1. National Gallery Singapore accepts NFT donations and collaborates with NFT platforms like Nifty Gateway to launch fundraising auctions featuring artworks, NFTs and art experiences.
2. Singapore Red Cross has partnered up with Triple-A, the first crypto payment gateway licensed by MAS, to accept cryptocurrency donations in various cryptocurrencies including Bitcoin, Ethereum, Tether and USD Coin.
3. Lutheran CCS has a secure crypto donation wallet available on their website.
4. Care Singapore is planning to auction works of art that are backed by NFT received.
5. Charities such as MINDS, Dementia Singapore, Limitless, the Salvation Army are collaborating with web3 payment portals like Crypto.com to expand their donor pool.
6. Platforms like SEEDS are leveraging blockchain technology to create an ecosystem of mutual empowerment, linking individuals, non-profits, institutions, and businesses for social impact.
What is Cryptocurrency Philanthropy and How Does It Work?
Cryptocurrency philanthropy involves the use of cryptocurrencies and blockchain technology for charitable and philanthropic purposes.
Here's how it generally works:
· Individuals or organizations can make donations to charitable causes using various cryptocurrencies such as Bitcoin, Ethereum, or other altcoins.
· This involves transferring digital assets directly to the wallet addresses provided by the charitable organizations.
· Blockchain technology, which underlies most cryptocurrencies, is inherently transparent and traceable. This means that every transaction is recorded on a decentralized and publicly accessible ledger. This transparency ensures accountability and allows donors to track how their funds are used.
This data from The Giving Block underscores the resilience and enduring commitment of the Web3 community to philanthropy. Now, let's delve into the compelling benefits that cryptocurrency philanthropy brings to the forefront, shedding light on the transformative potential that lies within these digital assets for charitable endeavours.
Benefits of Cryptocurrency Donations
1. Cryptocurrency donations are sizeable
An average crypto donation is USD 10,000 compared to an average online donation of USD 128, attributed to the fact that the higher than average income of crypto donors.
2. Increased access to funding – a new pool of donors
Cryptocurrency donations offer an additional avenue for charities to receive funding. It allows charities to tap into a new pool of donors—crypto philanthropy is attracting donors of a younger demographic with most crypto donations coming from young and tech savvy adults that support causes and narratives they resonate with on social media platforms.
3. Diversification across Web 3 communities
NFT creators such as musicians and artists and Decentralized Autonomous Organizations (DAOs) are using their platforms to support charities.
Future-focused Leadership
Further to the infographic above, charities that would like to maintain a cryptocurrency wallet and accept donations in digital assets in the future, below are the practices by charities that currently accept cryptocurrency donations:
1. Board and senior management to conduct thorough risk assessments and develop risk management strategies tailored to handling risks such as lack of appropriate corporate governance in the web3 platforms, crypto volatility, cybercriminals, money-laundering and basis risk resulting in losses in collateralized transactions.
2. Do a due diligence process for donations above the threshold amount set by the charity as practiced by British Red Cross as shown in the exhibit below.
3. Develop internal Know Your Donor (KYD) and Anti-Money Laundering and Counter Terrorism Financing policies – for example:
a. Take steps to identify and verify the background of the donor such as to assess any risks,
b. If the donation is from an organization, the charity should know its business and its registration details,
c. Ensure that the reputation of the donor or organization is appropriate and aligned with that of the charity.
4. Provide transparent reporting mechanisms to assure donors of the responsible use of crypto donations.
5. Select regulator-approved exchanges and platforms aligned with the policies developed by the charity. In the Singapore context, use MAS-licensed exchanges and platforms if the charity decides to maintain a crypto wallet, here is a list of MAS-licensed crypto platforms as of 2023.
6. Implement robust cybersecurity measures such as:
a. anti-virus/anti-spyware software/firewalls,
b. encryption and data backup,
c. password protection,
d. 2 FA authentication, and access authorization
e. whitelist safe URLs to prevent access to phishing websites.
In conclusion, cryptocurrency philanthropy presents a dynamic landscape filled with both opportunities and challenges for non-profit organizations. While the decentralized nature of cryptocurrencies can enhance transparency and efficiency in charitable transactions, non-profit leaders must remain vigilant to navigate potential pitfalls such as price volatility and regulatory uncertainties. By embracing best practices and staying informed about the evolving crypto space, non-profit leaders can safeguard their charities and harness the full potential of digital assets to drive positive impact. As we venture into this new era of giving, it is essential for organizations to strike a balance between innovation and prudence, ensuring that their mission to make a difference is not only preserved but strengthened by the transformative power of cryptocurrency donations.
