Trends in Crypto Giving

Data have proven that crypto investors are disproportionately generous compared to other investor communities. Of Fidelity Charitable's full investor population, 45% of crypto investors donated $1,000 or more, while only 33% of the general investor population donated that same amount to charity in 2020. Overall, $158 million in crypto assets were donated at Fidelity Charitable in 2021, which was a 464% increase from 2020 (Fidelity Charitable, 2021).

Additionally, the number of crypto owners is rising. In 2021, crypto owners increased from 106 million (January 2021) to 221 million (June 2021) to 296 million (December 2021). It's estimated that soon, there will be 1 billion crypto owners globally (Crypto.com, 2022). Domestically, about 14% of the US population (that's over 20 million American adults) have said they are invested in crypto, and approximately 19.3 million American adults plan to purchase crypto within 2022 (Gemini, 2022). High crypto adoption rates coupled with the influx in crypto donations makes this new digital currency hard to ignore.

Why Are Crypto Investors Donating?

For millennials, using cryptocurrency as an investment asset and giving back to charity is important, but the big question is why are they donating?

There are several reasons why millennial crypto owners are donating:

• They're an idealistic, younger generation wanting to donate to causes they believe in.
• Millennial crypto investors now have appreciated crypto investments as available capital to be given away. Depending on when an investor started investing in crypto, there still may be significant appreciated gains even through the 2022 crypto market correction.
• The COVID-19 pandemic accelerated attention of millennials to donate to health and human service nonprofits as well as other nonprofits affected by the crisis. In addition to intrinsic rewards, one significant reason as to why crypto investors are donating: tax benefits.

Cryptocurrency sold or exchanged for profit is subject to capital gains tax (and, in some cases, state income tax). When a crypto investor sells or exchanges their crypto profit for cash, then the length of time they held their crypto indicates their capital gains tax burden. If they held it for less than a year, then short-term capital gains tax applies (up to 37%), but if it's longer than a year, long-term capital gains tax applies (up to 20%).

However, tax-savvy crypto investors can avoid this and receive a tax deduction by donating their crypto. When crypto is donated directly to a nonprofit, donors can avoid paying capital gains tax on appreciated crypto, and they receive a federal income tax deduction. The length of time the crypto was held will determine the federal income tax deduction. As of the date of donation, crypto that is held short term (less than a year) will receive a deduction for the original amount paid for the crypto (basis). Crypto held long term (longer than a year) will receive a federal income tax deduction for the fair market value of the crypto. Donors could always sell their crypto for cash and then donate the cash, but this would be disadvantageous because the donor would have to pay capital gains tax. This would result in an ultimately smaller donation.

The Top Five Exciting Things About Crypto Donations for Nonprofits

With a clearer understanding of cryptocurrency, who crypto investors are, and its global growth, we can get excited about what this means for nonprofits.

• A net new pool of donors.
  • Traditionally, the typical donor is 64 years old, they donate twice a year, and they aren't donating crypto (Double the Donation, 2022). When nonprofits integrate crypto donations into their fundraising strategies, they are opening themselves to a whole new pool of donors in the millennial and Gen Z generations. Millennials currently outnumber baby boomers, and they are adopting and donating crypto at a rapid rate. By tapping into this age group and cryptocurrency, nonprofits could see gifts increase by the hundreds of thousands.
• Tax efficiencies.
  • Donating crypto is a win-win for donors and nonprofits. When donors donate crypto to a 501(c)3 tax exempt nonprofit, then the donation is tax deductible. Depending on how long the crypto was held, donors will be able to deduct either the basis value or the fair market value of the crypto donation. They'll also avoid paying capital gains tax on the appreciated crypto. When nonprofits receive a crypto donation directly, they receive the full market value of the crypto at the time of donation. This could have been up to 37% less if the donor sold the crypto and donated the cash. Thus, the donor can make a larger gift leveraging the tax benefits of donating an appreciated capital asset directly to a nonprofit.
• Larger gifts.
  • When we said crypto donors are disproportionately generous, we meant it. As of 2021, the average online cash donation was $128 versus the average crypto donation of $10,455 (The Giving Block, 2021). Nonprofits that integrate crypto acceptance tools often see 82× larger donations than online cash donations from their existing and prospective donors.
• Crypto giving is only going up.
  • As crypto enthusiasm continues to surge globally, it's projected that well over 40 million Americans will own crypto by 2023. It's obvious that crypto investment has become a strategic, diversified financial move by the average American. As crypto investors see their digital assets become a more important part of their holdings, they'll look for ways to make an impact and give back, opening a completely new revenue stream for nonprofits.
• We can make accepting crypto easy.
  • By partnering with platforms such as Overflow.co, we can implement a seamless crypto donation experience for donors. By integrating technology, donors can come to the nonprofit's website and donate crypto within minutes. These platforms provide the nonprofit with back-office tools for accounting purposes, saving time and logistical headaches. The automation also ensures donors and nonprofits are IRS compliant.

Step 1: Internal Education for Receiving Crypto Donations

Accepting crypto donations may sound intimidating, but it doesn't have to be daunting. It's just a matter of educating your gift officers and marketing team on what cryptocurrency is, how it can be advantageous as a gifting opportunity (i.e., tax benefits), and how to donate crypto.

Gifting officers, the marketing team, and potentially everyone within the organization should be able to explain the basics of donating crypto to donors.

Simply put:

1. Donate. A donor visits your organization's website and selects the cryptocurrency (e.g., Bitcoin, Ethereum, etc.) and how much they want to donate.
2. Transfer. Within minutes, the crypto is transferred from the donor to the nonprofit and is liquidated at the market value of the crypto.
3. Receive. The donor will receive a tax receipt reflecting the donation amount they can use as charitable deduction on income tax filings. And the nonprofit receives the net cash from the liquidated asset.

In addition to understanding the basics of crypto donations, the marketing team within your organization has to be well-versed in speaking to the new demographic of donors: millennials. It's vital to understand that crypto donors are most likely young professionals, tech-savvy, civic-oriented, living in urban US regions, and women and men with diverse ethnic backgrounds. Additionally, your marketing team will need to know exactly how this demographic prefers to be communicated with (e.g., social media, text messages, via influencers) as a way to optimize marketing budgets and efforts.

It's also important to note that the IRS views crypto donations as gifted property. Officers at your nonprofit and donors will be responsible to file appropriately with the IRS.

• Accepting crypto directly and liquidating within three years. The nonprofit will file Form 8282 with the IRS and send a copy to the donor. Additionally, nonprofits will have to include crypto donations as a noncash contribution on Schedule M (Form 990).
• Accepting crypto donations over $250. The nonprofit must provide the donor with a contemporaneous written acknowledgment of the donation.
• Accepting crypto donations over $5,000. The nonprofit may be asked by the donor to sign Part IV of Form 8283, which acknowledges receipt of the property. Additionally, the donor will most likely need an independent appraisal of the donated crypto for filing purposes.

Step 2: A Modern and Self-Service Crypto Donation Channel

More and more nonprofits are looking to expand donor pools and diversify sources of funding. Accepting crypto donations accomplishes both. To do that, your nonprofit needs to implement simple, modern, self-service crypto donation technology that makes donating crypto as easy as venmo or cash app on their mobile phone.

A modern, self-service donation flow should look like this:

1. Crypto donation technology is implemented and enabled on the nonprofit's website.
2. The donor accesses the nonprofit's website and selects the donate crypto option.
3. The donor selects the cryptocurrency and amount of crypto they would like to give.
4. The nonprofit's QR code is displayed and ready to scan.
5. The donor opens their digital wallet and scans the QR code.
6. The crypto is transferred and liquidated within minutes, which retains the market value of the crypto for the nonprofit and the donor.
7. The donor receives a tax receipt and/or acknowledgment letter for income tax filing purposes

Implementing a digital crypto giving solution on your organization's website creates a seamless giving experience for donors as well as a back-office automated processes that reduces reporting and processing hours, decreases human error, and saves your staff's time to focus on other fundraising initiatives that push your nonprofit's mission forward. The best way to do this is to simply partner with a technology platform like Overflow that has already built the frontend and back-office tooling to enable this for your organization. Attempting to try and build it yourself will be a fool's errand because it will cost a lot of money and will not benefit from the learnings across hundreds of organizations on the platform. Platforms like Overflow have teams that can collaborate with your IT or website admin to easily install the giving solution on your website as well as train key staff on how to manage the giving on the backend.

Step 3: Placement of Crypto Giving Options

One key factor to succeeding with crypto fundraising is to ensure the crypto giving option is placed prominently alongside any other cash, credit, or stock giving buttons on the website. The millennial demographic, most likely to donate crypto, will abandon the donating process if the website or technology takes too long to use. Make the crypto giving option obvious with minimal clicks to maximize crypto giving.

Tips to focus on for successful placement and donation flow:

• Prominence
  • Reduce the number of clicks it takes to arrive at the “Give Crypto” button.
  • Add a “Give Crypto” option to the nonprofit's homepage, “Other Ways to Give” page, the main “Donations” page, and create a dedicated “Donating Crypto” landing page to the site.
• Clear language
  • Place very specifically labeled buttons and links on the nonprofit's website that say, “Give Crypto” or “Donate Crypto.”
• Education and awareness in the giving flow
  • Giving crypto is a new concept for many long-term donors and first-time donors. Add a message such as “Maximize the impact of your donation and increase your tax savings by donating crypto directly” to educate or reiterate the tax benefits to donating crypto.

Step 4: Consistency Across Platforms Elevates Awareness

With the right placement of crypto giving options, nonprofits can generate hundreds of thousands of dollars in crypto giving, triggering a new funding stream from existing and new donors. However, having a crypto giving button on your nonprofit's website doesn't do much unless you have consistency through an omni-channel (or multichannel) messaging and marketing strategy across applicable platforms.

Here's some useful advice in building awareness across platforms that millennials use:

Social Media

• Build crypto giving into the social media calendar to announce and promote crypto giving.
• Create organic and paid content for social media platforms that spread the message of the nonprofit's mission, how to donate crypto, and the tax benefits of donating crypto. Use social media platforms like TikTok, Instagram, YouTube, Twitter, Snapchat, Reddit, and LinkedIn.
• During major events use relevant hashtags in social media posts like #GivingTuesday, #BitcoinTuesday, and #Crypto-GivingTuesday.
• Engage with social media influencers who have a genuine interest and are enthusiastic about the nonprofit's mission.
• Monitor, share, and engage with social media posts when the nonprofit is tagged—especially by micro and macro influencers.
• When making a fundraising request to followers, explicitly include crypto giving as an option and highlight the tax savings from donating crypto.
• Include a direct crypto giving link in the nonprofit's social media bios or “About Us” section.

Mobile

• Use SMS marketing to alert donors of trends and events such as #GivingTuesday and #BitcoinTuesday or when the crypto market is spiking.
• Inform existing donors via mobile text that crypto giving is available on the nonprofit's website with a link to the crypto giving landing page.

Email

• Any time a nonprofit includes an ask in an email or has a link to donate, make sure that link leads directly to a giving page that includes a crypto donation option.
• Include subject lines and taglines such as “Maximize your impact with crypto donations.”
• Increase communications when the crypto market spikes.
• Incorporate a link in the nonprofit's employee email signatures that the nonprofit is now accepting crypto, with a link to the crypto giving landing page.

Events

• Include a way for donors to buy tickets using crypto donations.
• Highlight crypto giving as an option on the “Call to Action” giving slide.
• Add a QR code on posters, fliers, and slides with a direct link to crypto donations.
• Post photos and videos related to crypto gifting on social media at the event in real time via stories, lives, retweets, and so on.

Content Pieces

• Create a robust content strategy with content that can be searched on Google. Millennials want to search and find informative videos, blog posts, e-books, whitepapers, case studies, and donor stories and testimonials. On each content piece, circle back to the nonprofit's mission as well as offer a value proposition, such as the tax benefits of donating crypto.
• Add a link or QR code that links to your crypto giving landing page on each printed content piece, such as brochures, fliers, schedules, announcements, and so on.

Platforms Not to Use

• Traditional outbound marketing methods will not be effective with millennials. Millennials resonate with what they feel is authentic content discovered on their own versus company-focused, impersonal content that is thrown at them. Avoid the following platforms when marketing to millennials:
  • Phone. They won't answer.
  • Direct mail. They'll throw it out.
  • Radio advertising. They either have a paid streaming service for music or do not listen to the radio.
  • Magazine ads. Nearly 100% of millennials use the internet and nine out of ten have a smartphone (Moraes, 2020)—they do not read print material.

Step 5: Donor Awareness and Education

The biggest barrier to receiving crypto donations is the lack of awareness that nonprofits have the technology and proper processes to accept crypto. Additionally, most existing and prospective donors aren't aware that crypto giving is the most tax-efficient way to give back.

The best thing a nonprofit can do is educate, engage, and repeat when it comes to informing donors about crypto giving.

• Educate your current donor pool and potential new donors on the tax efficiency of donating crypto. Emphasize how easy it is to donate crypto through the nonprofit's website and how donating crypto will maximize impact. This is a win-win for donors, who receive significant tax savings, and nonprofits, which receive a larger contribution than if the donor sold crypto and donated the cash.
• Engage with your crypto donors. Whether they are post-ing about donating to nonprofits, asking questions about crypto donations, or are interested in the impact of crypto donations—be available to respond, engage, educate, and show appreciation for gifts through social media posts and other content pieces.
• Repeat the benefits of donating crypto. Through multiple marketing platforms, someone must listen to, see, and hear a message at least seven times for the message to sink in. By repeatedly educating and engaging with donors about crypto giving, it will expand the donor pool, tap into a new, noncash asset fundraising channel, and increase the average size of gifts to the organization.

There's a small percentage of existing and prospective donors who truly understand the tax benefits in a way that drives consistent crypto donations. Therefore it's crucial for nonprofits to provide high-level education on the potential tax benefits and highlight that crypto is the most tax-efficient way to give. However it's also important to encourage donors to be intentional in evaluating the overall tax impact of their charitable giving plan with a CPA or wealth manager. (This book and Overflow are not meant to be taken as tax advice. Please consult a tax professional for information about any potential tax implications associated with charitable giving.)

Step 6: Generating Donor Enthusiasm

Now that you know the benefits of donating crypto and the huge impact crypto gifts can make toward a nonprofit's mission, it's important to generate enthusiasm in the crypto donor community. Following are some messaging options a nonprofit can begin to incorporate on its websites, emails, social media posts, and any other pieces of marketing collateral:

• Save more on taxes by gifting crypto.
• Donate crypto. Change lives.
• Increase your gift by up to 37% by donating crypto! Instead of selling crypto to donate cash, you can now select the crypto you want to give and donate it directly to [nonprofit name]. Visit [nonprofit website] and donate today!
• Make a big impact. Donate Bitcoin and other crypto to [nonprofit]. You can now donate up to 37% more with a direct crypto donation than if you sold your crypto and donated cash.
• Did you know you can donate your crypto to [nonprofit]?
• We now accept Bitcoin and other cryptocurrencies. By donating crypto you'll make a larger impact on [nonprofit mission] and as an added bonus, you'll save on taxes because of your charitable donation. Visit [nonprofit website] and learn more today.
• Impact/support [nonprofit mission] and get a tax benefit through crypto donations. Donate crypto to [nonprofit] now.
• Tax-savvy donors are now putting their crypto investments to good use by donating to charity. Donate Bitcoin or the crypto of your choice to [nonprofit] to make an impact on [nonprofit mission] and receive a tax deduction.
• Maximize your charitable donations by donating crypto! We now accept Bitcoin and other cryptocurrencies directly. Visit [nonprofit website] and donate crypto without having to sell your crypto.
• We are now accepting Bitcoin and other crypto! Visit [nonprofit website] and select donate crypto. Donate however much you like and receive a tax receipt. Your donation will be sold for cash and immediately used for [nonprofit mission]!
• Now it's even easier to be generous. We are now accepting cryptocurrency. Just visit [nonprofit website] and select the crypto you'd like to donate. Within minutes your crypto is transferred and sold. You'll receive a receipt for a tax deduction, and we'll receive the cash your crypto was sold for. Your donation will immediately be put toward furthering [nonprofit mission].
• You can donate more than cash to [nonprofit]. We are now accepting crypto. Visit us today and donate the crypto of your choice. Your crypto donation will be used to support [nonprofit mission]. In addition to your generosity, you'll be able to file for a tax deduction for the value of your crypto donation. Get started today at [nonprofit website].

Now that we have completed our deep dive into crypto donations, we will do the same for stock donations, which represents an even bigger immediate opportunity for your organization. While the cryptocurrency market cap is between $1to $3 trillion today, the public securities and stock market is valued at over $40 trillion!