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Crypto, Blockchain, and Charities: What You Need to Know

May 24, 2022 - 14 min read

Crypto donations, tokens, and platforms are increasingly influencing the charitable giving and non-profit space. Here’s how.

Today, more people than ever want to make a positive impact on the world around them, and much of that desire is reflected in increased giving to charities. In 2020 alone, Americans gave an estimated $471 billion to charities, with most of those donations coming from individuals, not organizations. 

As a novel and perhaps revolutionary form of payment, cryptocurrency has begun to make a major splash in the world of charity. With more and more charities accepting crypto as a form of payment, crypto charitable donations reached an estimated $330 million in 2021, with nearly 90% of those donations coming in Bitcoin. 

However, the actual amount of giving is likely much larger due to the difficulties of tracking charitable giving in crypto across a wide swath of U.S. and international organizations. Aside from direct crypto giving, a variety of coins, tokens, and protocols have emerged that give, or at least claim to give some or all of their profits to charity.

In addition, some charities and organizations are beginning to issue their own tokens to encourage giving while perhaps including an increasing economic incentive for doing so. 

Despite the importance of crypto in the charitable giving space, blockchain, the technology upon which crypto is built, may end up having an even more important impact on the industry. Unfortunately, the charity sector is rife with fraud and mismanagement, both from within charities themselves and throughout the external giving process. 

Even the best charities have little ability to track and monitor the way their donations are being used, which has become a particular problem in developing countries, where charitable donations are often directly stolen by governments or criminal gangs before they reach their intended recipients. 

Fortunately, blockchain has the potential to help address many of these issues, from providing immutable ledgers of the way funds are spent within charities themselves, to helping track donations through the entire charitable supply chain down to the intended recipients. 

Major charities are already beginning to accept crypto for donations

As previously mentioned, a wide array of charitable organizations have already started to accept direct donations in crypto. Some of the most well-known charities to do this include: 

The Rainforest Foundation: The Rainforest Foundation is a non-profit committed to helping tackle deforestation by protecting rainforests via the purchase of land that would otherwise be developed for farming, industrial, or agricultural uses. As of early 2022, the group had raised more than $520,00 in crypto, helping it save thousands of acres of pristine rainforest. 

The Electronic Freedom Foundation: The Electronic Freedom Foundation (EFF) a non-profit committed to helping people around the world protect their individual online privacy and civil liberties by funding legal advocacy and political action efforts to oppose legislation that could infringe on people’s freedom of speech and human rights. The EFF currently accepts donations in Bitcoin, Bitcoin Cash, and Ethereum. 

The UNICEF CryptoFund: Founded in 2019, the UNICEF CryptoFund focuses on making investments in developing countries, with a particular focus on areas where disasters have recently occurred. Since 2019, the organization, the first UN institution to accept crypto, has received more than 2500 ETH and eight Bitcoin, which it has used to invest in startups, including a digital financial services startup for Rwandan refugees and an emergency response platform in Kenya. 

A variety of organizations have sprung up to help facilitate charitable donations in crypto

Despite the proliferation of direct donations, multiple third-party organizations have started to help individual crypto donors facilitate the giving process; in some cases, by providing additional information about species, or even allowing users to schedule monthly crypto donations to a wide swath of charities with only a few clicks. 

Crypto for Charity is one organization doing just that. Crypto for Charity has partnered with over 55,000 charitable organizations for crypto donations, and permits donations in over 30 cryptocurrencies, including major cryptos like Bitcoin, Ethereum, Tether, and USD Coin, as well as more niche coins and tokens like Shiba Inu, AAVE, Yearn.finance, and Avalanche. Crypto for Charity claims that all donations are converted to U.S. dollars within 10 minutes and directly sent to the charity in question. The organization also offers easy tax receipts for donors looking to use their crypto donation as a potential tax deduction. 

The Giving Block is another example of an organization connecting crypto donors to major charities. As another one of the world’s largest crypto donation services, it offers funds that distribute crypto to multiple charities simultaneously, as well as an option for users to a specific cause area, such as the environment. The Giving Block currently accepts donations in 45 different cryptocurrencies, making it far more versatile than most individual charities that may only accept mainstream cryptocurrencies like Bitcoin and Ethereum. 

Cryptocurrency can allow individuals to bypass charities and give directly to individuals 

In the past, it was relatively difficult for charitable givers to contribute directly to individuals in need or even those running small charitable endeavors. However, with the proliferation of crypto, it’s never been easier to send funds to someone’s personal wallet. This is particularly prevalent on social media, where, for example, individuals in need of high-cost medical treatment can simply post their wallet addresses to solicit donations. 

Other popular examples include providing direct crypto donations to journalists and YouTubers operating in authoritarian countries or making direct crypto donations to farmers or small business owners in developing countries. These direct donations allow users to bypass charities, meaning that 100% of their funds, minus transaction fees, reach the individual in question. All the recipient needs is a smartphone and a crypto wallet, which is a major advantage for those who want to send charitable donations to individuals who may not have a bank account. 

Crypto donations have already had a major impact on the conflict in Ukraine 

The conflict in Ukraine is one major cause where crypto donations have had an outsized impact. Since Russia’s invasion of Ukraine in February, more than $135 million in cryptocurrency has been donated to various organizations in Ukraine, including direct donations to the Ukrainian government.

In addition to traditional crypto donations, many individuals have sold NFTs in order to help fund donations to Ukraine, and, in addition, some NFT projects have been released specifically to help donate to the Ukraine Crisis. 

For example, the non-profit organization StandAgainstWar is releasing an NFT collection entitled “Peace Nightingales,” a series of 10,000 NFTs. 90% of the sale proceeds will automatically go to a group of 17 different NGOs which are currently helping Ukraine, while 10% will be used to fund the project itself. NFT resale royalties will also be directed to the same NGOs to further increase the number of donations.

Blockchains can help charities, NGOs, and governments better track how their donations are really used 

While they may have an important impact on many causes, unfortunately, charities have received a bad reputation for their extremely high overhead costs, as well as significant fraud and mismanagement. For example, industry watchdog Charity Navigator estimates that, on average, 40% of charitable donations go to overhead costs. Some of the best charities have limited these expenditures to between 5-15%, but many of the worst-performing charities spend 60%, 80%, or even more on overhead costs and inflated salaries. Unfortunately, many charities are partially or completely fraudulent, donating almost none of their donations to charity 

Via the creation of immutable ledgers on a blockchain, charities can better track their expenses and charitable donations, which can provide better data both for internal use and to demonstrate their efficiency and honesty to potentially concerned donors. Charitable donations can be directly traced on the blockchain, so givers know exactly where their funds are going. If blockchain-based donation and expenditure tracking begin to become widespread for charities, it could help significantly reduce fraud and mismanagement via increased transparency.  

These developments will also have a major impact on the way foreign aid is distributed to developing countries. As previously mentioned, foreign aid, whether given in cash, food, or vouchers, is often stolen by governments, criminal gangs, or even hoarded by some intended recipients at the expense of others. According to the U.N., 30% of all foreign aid ends up in the hands of corrupt institutions. Instead of distributing aid or funds centrally or via distributing physical vouchers, utilizing individual blockchain wallets makes it significantly more difficult to steal or misappropriate funds or vouchers. In this way, blockchain-based solutions can significantly increase the effectiveness of foreign aid initiatives. 

NFTs for charity have exploded in popularity over recent months 

In addition to soliciting donations in crypto and using blockchain internally, charities have started to mint NFTs to raise funds for their causes. In early 2022, the aforementioned crypto charity platform  Giving Block said that it had already seen over $12 million in cryptocurrency (30% of its donation volume), originate from NFT-based charitable projects over the previous several. 

Sometimes, this involves using the charity’s celebrity ambassador (if they have one) to create an NFT for the charity itself. In other cases, it can involve hiring a well-known artist or creator, or even a creative team, to contribute to the creation of the NFT.months.  

In other cases, creators will mint an NFT and donate part or all of the proceeds to a selected charity without the guidance or input of the charity itself. For example, in March 2021, famed artist Beeple auctioned off an NFT which raised $6 million for the Open Earth Foundation, a California-based non-profit that focuses on creating technological solutions to help address major environmental issues. 

In another example, UNICEF (the United Nations Children’s Fund) minted 1,000 NFTs in order to celebrate the organization’s 75th year in operation. The organization, which partnered with data visualization expert and artist Nadieh Bremer to create an NFT collection called “Patchwork Kingdom,” raised approximately 235 ETH. The funds went to support children in underserved communities around the globe via UNICEF’s Giga organization, which helps children in developing countries connect to the internet to further their education. 

In some situations, charities will include an NFT as a gift for contributing a certain amount to a cause or even for simply engaging with the project itself. For example, entertainment company iNDIEFLIX recently released a documentary entitled Angst, focusing on the issue of children’s mental health. To help promote the documentary and raise money for children’s mental health charities, the company released 1,000 free limited edition NFTs, which initial users could obtain by visiting the film’s website and downloading an Eluvio wallet. 

Some corporations have also jumped on the NFT bandwagon in order to raise funds for their in-house charitable endeavors. For example, Taco Bell recently minted and auctioned 25 taco-themed NFT GIFs, with 100% of the proceeds going to benefit the Taco Bell Foundation’s Live Más Scholarship. Some NFTs in the collection sold for as much as $3,646. In addition, due to a smart contract built in the NFT, the Taco Bell Foundation will also receive 0.1% of every subsequent NFT sale. 

The potential impact of charitable tokens

While crypto donations to charities have unarguably made the greatest impact on charities themselves, some non-profits are going a step further by launching their own coins and tokens in order to raise money and perhaps even provide users an economic incentive for doing so. While most charity tokens are still in their nascent stage, the charity and non-profit token sector is likely to only grow in the coming months and years. 

Some organizations that have recently released or are developing charity tokens include: 

Save Planet Earth: Save Planet Earth is a carbon-sequestration project that incorporates “carbon credit NFTs, a green blockchain-powered by renewable energy, and a carbon credit exchange that will use $SPE as a cryptocurrency.” In addition to its goal of reducing carbon emissions via its carbon credit exchange, the organization plans to use its profits from the sale of SPE to lobby for meaningful environmental legislation, support tree planting, and fund better marine management projects. 

HappyCoin: HappyCoin is “a charity-focused oriented token that is fighting mental illness all over the world. ”HappyCoin is a BEP-20 token on the Binance smart chain. Profits will fund projects, organizations, and charities focused on mental health. Over 70,000 people currently hold HappyCoin, and the project has donated more than $210,000 to mental health projects and charities. 

Save The World: Save The World is an ambitious blockchain and crypto-focused charity project, which is currently soliciting funds for a variety of charitable projects, the first of which involves providing relief to COVID-19 victims in India. The project has released its own token, the SAVE token, which will help facilitate its charitable donation initiatives. Each time the token is transacted at a 10% fee, 3% of the transaction fees will go to funding the project’s current charity project, 5% is distributed to SAVE holders, and 2% finances the upkeep and operations of the project itself. Like HappyCoin, the SAVE token, which is available on PancakeSwap, is a BEP-20 token on the Binance smart chain. So far, Save The World has donated $1.7 million (2437 BNB) to COVID-19 relief projects in India. 

Aquari: Aquari is a non-profit focused on helping restore Earth’s oceans through conservation and advocacy efforts, with a specific focus on promoting local beach and ocean clean-ups throughout the world. The Aquari token is designed to help raise money for these initiatives. Much like the Save The World Project, each Acquari token transaction features a 10% fee, of which 3% will finance the organization’s conservation efforts, 4% will be burned to combat token inflation, and 3% will be distributed among current Aquari token holders. 

World of Waves: Much like Aquari, World of Waves is an aquatic wildlife conservation project based on the distribution of the project’s native WOW token, which, like Save The World’s SAVE token, was built on the Binance Smart Chain. Transaction taxes are 11%, 4.4% goes to World of Waves’ conservation efforts, 3.3% is distributed back to WOW token holders, and 3.3% is added to the liquidity pool. Funds are withdrawn monthly, and donations are voted on by the community of token holders themselves. 

Despite the promise of crypto giving for charities, scams still abound 

The traditional charity sector is no stranger to scams, and, unfortunately, neither is the world of crypto charity. Perhaps the most obvious type of scam is the proliferation of fake social media accounts on platforms including Facebook, Instagram, Telegram, Discord, TikTok, and other popular networks. These platforms may directly impersonate real charities, invent entirely fake charities, or create accounts with charity names that sound extremely close to existing, legitimate charities. Sometimes, the creator will buy followers to give the profile additional legitimacy. Most often, one or more crypto wallet addresses will be posted on the profile, encouraging donors to transfer crypto to the fake charity’s wallet, which, in almost all cases, is irreversible. 

In other cases, fraudsters will directly email individuals claiming to be charitable organizations. For example, in recent months, scam emails soliciting donations to Ukraine have been particularly prevalent, with scammers reportedly sending hundreds of thousands of emails per day in the hopes of catching potential donors off guard. 

In one famous case, several UK YouTubers created a BEP-20 token called Save The Kids (KIDS), which was promoted by a variety of major influencers as a way to donate to children in need while also creating profits for token holders. Unfortunately, a large group of the influencers involved bought up large amounts of the token, only to sell it off in a coordinated manner, executing the kind of “pump and dump” scheme that has been increasingly seen across the traditional crypto and token sector. The resulting crash of the token saw many investors lose nearly all their money, with zero evidence of any funds being utilized for any charitable purpose. 

Financial benefits of donating crypto to charity include reducing capital gains tax burdens 

Donating to charity with crypto can be a great way to further a good cause, but it can also be highly beneficial for those wishing to reduce their capital gains tax burden. It may be better to directly donate crypto to a charity rather than cashing out your crypto and donating proceeds in fiat currency. According to Charles Schwab, donating in crypto can “potentially eliminate the capital gains tax you would incur if you sold the assets yourself and donated the proceeds, which may increase the amount available for charity by up to 20%.”

It may also be beneficial for donors to itemize deductions on their tax returns in lieu of taking the standard deduction. This can allow the donor to claim a fair market value charitable deduction for the tax year during which the donation is made. 

In general, however, donors can only take a deduction for the fair market value of their crypto for 12 months or more. If this is the case, a donor can deduct their crypto’s fair market value, up to 30% of their adjusted gross income, from their income for that year. If a donor gifts crypto worth more than 30% of their adjusted gross income, they can carry that additional deduction forward for up to five years. 

In conclusion: Crypto is an ideal way to boost charitable giving, though the sector still faces some growing pains

Much like most other sectors of the blockchain and crypto industry, the blockchain and crypto charity sector is still in its infancy. Crypto can be incredibly empowering for both donors and recipients due to the ability to donate directly to individuals, projects, and organizations, without the need for expensive middlemen. NFTs and charity tokens also provide new ways for charities and nonprofits to promote their causes, while also providing economic benefits for donors. 

In a broader sense, blockchain may also be able to revolutionize the charitable giving sector by increasing financial accountability among charities via blockchain-based donation and expense tracking. This can potentially increase market competition among charities as donors begin to demand greater transparency and lower overhead costs. This will help encourage charities to reign in unethical behavior while helping donors ensure their donations are having a positive real-world impact. 

Despite these positive trends, the crypto and blockchain charity sector is increasingly filled with scams, whether they be fake accounts, fake charities, or token “pump and dump” schemes. Unfortunately, there is little that can be done to directly eradicate this issue. In all likelihood, more education is needed to prevent these scams from successfully duping donors. 

Though risks and downsides certainly exist, the crypto charitable giving space is likely to continue to explode in the coming years, and most of the impact will likely be a net positive. Overall, increased crypto donations and blockchain adoption among charities will likely lead to greater financial efficiency, more giving, and more progress towards helping a wide spectrum of good causes throughout the world. 

References: 

  1. Lin, C. (2022, Feb.) Bitcoin bounty: Cryptocurrency donations skyrocketed in 2021, according to Fidelity. Fast Company. 
  2. Phillips, G. (2022, Jan.) 7 Amazing Charities That Accept Cryptocurrency Donations. MUO. 
  3. (2022) Crypto for Charity. Crypto for Charity, by Freewill. 
  4. (2022, Apr.) The Peace Nightingales NFTs: A Collections Curated To Help Aid Ukraine Through Crypto Donations!. Bitcoinist. 
  5. Delp, V. What Percentage of Donations Go to Charity. Love to Know. 
  6. (2022) Using a blockchain infrastructure to distribute foreign aid. PA Consulting. 
  7. Wolfson, R. (2022, Jan.) NFT philanthropy demonstrates new ways of giving back. Cointelegraph.
  8. Wessel, M. (2021, Dec.) NFTs for good: how charities can fundraise with NFTs
  9. (2021, Aug.) Crypto With A Cause: These Nine Charity Tokens Will Save The World. Nasdaq. 
  10. Sacco, D. (2021, Jul.) Scam the Kids: The ‘Save the Kids’ crypto scandal involving several UK YouTubers is a painful reminder of the volatility of cryptocurrency and the dangers of trusting influencers – opinion
  11. (2021, Oct.) Benefits of Donating Cryptocurrency to Charity. Schwab Charitable. 
  12. Dore, K. (2021, Dec.) Crypto donations to charity are booming. What to know before making a year-end gift. CNBC. 

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