Important information for accepting and valuing cryptocurrency donations for community foundation donors
In response to the steady, albeit bumpy, rise in cryptocurrency valuations, community foundations are increasingly seeking solutions for prospective donations of cryptocurrency assets (“crypto”) and asking questions about accounting implications. This article outlines important considerations for accepting and valuing donations of crypto and working with third-party service providers to receive, hold, and liquidate these assets.
Options for processing crypto donations
There are a variety of approaches to receive and process crypto donations. While you have the option to receive and hold crypto in a “wallet” that you control, most foundations will prefer to use the services of a third-party “exchange” or a payment processor to receive, hold, and sell crypto on their behalf. These service providers offer technical knowledge, convenience, and greater security than most foundations are comfortable managing on their own.
The three main approaches include outsourcing the entire process to a third-party payment processor, managing the process in-house through an account on a crypto exchange, or directing the donor to a charity or donor advised fund sponsor that accepts crypto and will grant the proceeds from the sale of the donated crypto back to the community foundation. The organizations named below are constantly evolving their services and pricing; please check their websites for the most current information.
How can a community foundation accept crypto donations?
1) Outsource to a third-party donation sponsor: This approach is well suited for clients that lack the staff/capacity to manage the process internally.
- Advantages: Allow for streamlined acceptance of donations that features a copy-and-paste button for websites, automatic conversion of the donation to USD and a transfer of proceeds directly into the client’s bank account.
- Disadvantages: Fees for these services range from 1-5% depending on the vendor and size of the transaction.
- Examples: BitPay (crypto payment processor), or EnGiven & the Giving Block (solutions designed specifically for charities) or Every.org (a pass-through charity)
2) Manage-in House: This option is well suited for clients with a large established donor base, a high potential for sizable crypto donations and the staff/expertise to manage the process internally.
- Advantages: Lower trading costs and a wider array of different cryptocurrencies are accepted.
- Disadvantages: Challenging to navigate for less sophisticated organizations.
- Examples: Coinbase, Kraken, Gemini, Bitstamp
3) Refer donor to DAF Sponsor:
- Advantages: DAF sponsors will work with the donor to liquidate the asset and deliver the proceeds to the donor’s desired foundation.
- Disadvantages: DAF Sponsors can include additional processing fees that create barriers for donors making sizeable gifts.
- Examples: Fidelity Charitable, Schwab Charitable
Please do not hesitate to reach out if our team at CFHoCo with our investment partner, Brown Advisory, can help you think through options.