An AP Philanthropy Landscape Report
May 2022
Stories about cryptocurrency have been showing up in business journals, consumer magazines, daily newspapers, and nonprofit publications. In March, some funders acknowledged one of the only ways to get relief money into Ukraine was via cryptocurrency. We sent AP Researcher Laura Wilson to find out more. She looped in folks from ImpactMarket and Alight (formerly American Refugee Committee) to talk about implications of Bitcoin, Ethereum, and other crypto donations for nonprofits. You can read her report
New Ways of Giving
Starting as a thought experiment in the 1990s, cryptocurrency has slowly bled into everyday life, developing into a nearly-mainstream market. According to a recent survey by the Pew Research Center, from 2015 to 2021 the percentage of Americans who personally invested in cryptocurrency rose from 1% to 16%; in 2021, 86% of Americans knew something about cryptocurrencies. Official counts vary but the consensus is, more than 10,000 cryptocurrencies exist today, with the most popular being Bitcoin and Ethereum.
Congress is in the process of developing legislation to regulate cryptocurrency within U.S. borders, and has already passed a tax provision to simplify reporting requirements. These changes have implications for the philanthropic space and the willingness of donors and other stakeholders to engage with cryptocurrency.
Blockchains Enter the Philanthropy Space
Charitable giving via cryptocurrency gained steam in 2013 with the establishment of the BitGive Foundation, the self-described “first Bitcoin and Blockchain charity.” It rose sharply in visibility in 2017 when an anonymous donor established the Pineapple Fund and donated Bitcoin worth over $55 million to 60 charities. Since then options for donating cryptocurrency have expanded:
- Fidelity and Charles Schwab currently offer cryptocurrency investment options, leading the way for Donor Advised Funds (DAFs). Fidelity raised $76 million from 2015-2017.
- The Giving Block, founded in 2018, created a platform for the transfer of cryptocurrency donations to nonprofits able to accept them. In 2021, The Giving Block facilitated the transfer of nearly $70 million in cryptocurrency donations to more than 1,000 charities.
- Donors can donate directly through BitPay or other vendors supported by the nonprofit. United Nations Children’s Fund (UNICEF) was one of the first high-profile organizations to accept cryptocurrency donations directly.
- Many organizations in Minnesota have begun accepting crypto donations. These include the Saint Paul & Minnesota Foundation, the Minnesota Street Project Foundation, Mental Health Minnesota, Great River Children’s Museum, and MATTER.
Funding Missions with Cryptocurrency
Once the gifts are held by a donation management platform or nonprofit, more possibilities emerge. The decentralized characteristic of all cryptocurrencies allows them to bypass country borders and traditional currency exchange rates. To use cryptocurrency, nonprofits can either spend the digital asset or convert it into fiat (traditional) currency.
Many nonprofits will “cash out,” since volatility makes these currencies a risky choice for long-term investment. Most currency exchanges around the globe work with only fiat currencies. Some organizations, however, are working to build the capability to lean into the properties of cryptocurrency.
We spoke with representatives from ImpactMarket, and Alight who are collaborating to expand the practice and impact of Universal Basic Income (UBI) using cryptocurrency.
ImpactMarket created and maintains a platform for donors to give cryptocurrency. That currency is funneled directly to recipients in participating communities across Brazil, Nigeria, Ukraine, and India, many assisted by Alight. In communities where Alight doesn’t work directly, ImpactMarket partners with other nonprofits. The recipients of UBI funds choose how to use the currency, based on what is available in their area (“cash out” or use as is).
Their efforts haven’t been without challenges, like technology and Internet access, as well as building trust with recipient communities. But initial results are encouraging. Both organizations expressed hope for the future of the program, which seems to be fostering greater financial stability and long-term financial planning.
Without the existence of cryptocurrency, this type of global effort would be next to impossible. Through ImpactMarket’s platform, donors can see exactly where their currency is headed and which communities they are supporting, creating a strong sense of donor-connectedness (GiveTrack works in a similar manner). The global transfer of traditional currency is costly and time-consuming, while cryptocurrency has none of those associated fees.
Other ways of utilizing cryptocurrency on the nonprofit end include:
- Working in philanthropic incentive programs for cryptocurrency miners and donators like RootProject, PinkCoin, and Impact Market.
- Advancing donor involvement through the use of a reporting and voting system networked directly with donors (GiftCoin in partnership with Network for Good).
- Using a blockchain to track the source and movement of goods as they move through supply chains (IBMs Blockchain for Social Good).
The Future of Crypto for Charity
One significant drawback to cryptocurrency is its negative impact on the environment. Blockchains require large amounts of energy to store and verify transactions. Bitcoin mining, for example, consumes 22 to 22.9 million metric tons of CO2 in a year. That’s comparable to Kansas City’s annual emissions.
Only 39% of the energy used to mine Bitcoin comes from renewable sources (mostly hydropower), with the rest produced through traditional fossil fuels. While there are proposed solutions, they have not yet been widely implemented.
Art museums, battered by the impact of the pandemic on attendance and income, first turned toward, then away from, selling NFTs, for these environmental reasons. ImpactMarket uses Celo, the first carbon-neutral blockchain, which offsets its energy use by investing in tree planting and other carbon reduction projects. Alight’s decision to scale up its work with ImpactMarket will take environmental impact into account.
The anonymity of crypto donors is also problematic. Although transactions are recorded and tracked via IP address, the identity of the individual is not recorded. This creates an obstacle in creating and maintaining personal relationships with donors. It also turns away organizations that avoid opaque funding sources. In an interview with The Chronicle of Philanthropy, Erich Mische, Executive Director of Minnesota nonprofit Spare Key, said “We don’t want to get caught up in a situation where you get a knock on the door and find out that someone who gave you a significant donation is on some list that makes things problematic.”
AP is keeping a close eye on further developments, as the adoption of cryptocurrency in the philanthropic sector shows no signs of slowing down.
For more information on Access Philanthropy or suggest new ideas for a Philanthropy Landscape report, contact Steve Paprocki at [email protected]. To connect with researcher/author Laura Wilson, contact [email protected].