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- Accepting Cryptocurrency Donations for Not-for-Profits
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Cryptocurrency has been an emerging channel for charitable giving. The trend is evident when considering that the nation’s largest donor-advised fund, Fidelity Charitable, received $69 million in cryptocurrency donations in 2017 from 169 donors. This donation is followed by a more recent donation by tech company, Ripple. Ripple donated $29 million of its own digital currency this past year to DonorsChoose.org to fund over 35,000 U.S. public school classroom project requests, which currently stands as the largest-ever cryptocurrency gift to a single charity.
With over 1,600 types of cryptocurrencies currently available, Bitcoin being the original and most widely used, its popularity grows, and nonprofit organizations are more likely to come across the question, should the organization accept cryptocurrency donations?
Accepting cryptocurrency may present great opportunities for nonprofit organizations as it could appeal to the organization’s donor base, introduce new funding streams and lead to more and larger donations. If your organization decides to accept donations of cryptocurrency, key considerations include:
- Evaluating and understanding the risks of accepting or transacting in cryptocurrency
- Review of the organization’s gift and investment policy to address receiving, valuing, and holding cryptocurrency
- Review of internal control policies and procedures to address valuation, monitoring and processing of cryptocurrency
- Understanding the financial reporting framework and how to handle accounting for cryptocurrency in accordance with that framework
- Training opportunities to management and staff regarding cryptocurrency
- Financial statement disclosure of the asset in the statement of financial position and in the footnotes
The AICPA has published detailed guidance on its website in the article, Bitcoin Basics for NFP: Accepting and Valuing Cryptocurrency Gifts, and suggests that a good starting place is to update the organization’s gift acceptance policy and provides the following example:
The organization may accept gifts of cryptocurrency and other forms of digital assets after due diligence is performed to determine that the asset is able to be transferred and liquidated.
If your organization decides not to accept cryptocurrency, the gift acceptance policy should clearly reflect that decision.
When accepting these donations, it is best practice for the organization to sell the digital assets upon receipt as the asset price can be highly volatile. This helps to ensure that the organization receives the financial value intended by the donor at the time of the gift, avoid potential fluctuations in the market and allow for immediate use of the funds.
The process of receiving and selling cryptocurrency should be treated similarly to receiving gifts of public stock as both use third-party intermediaries and exchanges to transact the receipt and sale of the asset. The overall process is summarized in the following basic steps:
- Establish an account with a reputable broker to receive the donation.
- Provide the account number to the donor.
- Receive the donated asset.
- Provide instructions to sell the asset and wire the proceeds to your bank.
- Determine the gift value and acknowledge the gift.
Gift value is determined by:
- Actual price at the time of the contribution
- Closing price for the day of the contribution
- Volume weighted average price
- Average of the high and low price
Whether or not your organization decides to accept the digital currency, careful consideration should be taken regarding the risks and safeguards of its acceptance. Cryptocurrency will likely be with us for the long term and presents another way for donors to contribute to a cause or program. For a sample gift acceptance policy, see our website.