Ask Chuck: Donating cryptocurrency?
Dear Chuck,
We invested in some cryptocurrency a few years back. It has appreciated nicely. We want to give some to help the people of Ukraine. Do you have any tips for us?
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Crypto Donors
Dear Crypto Donors,
First, may I wish you and our readers a very Happy Easter! Eight in ten Americans plan to celebrate Easter this year. According to the National Retail Federation, U.S. consumers are expected to spend an average of $170 — or $20.8 billion total — related to the holiday: 90% on candy, 88% on food, 63% on gifts, 49% on clothing, and 48% on decorations. It is good to think more about being generous during this season that marks the greatest event in human history. He is risen!
Giving crypto
The war in the Ukraine has brought this topic into focus with many people around the world. On April 5th, CoinDesk reported that crypto donations are skyrocketing. The ease of transferring crypto across the globe has become very beneficial for charities.
Crypto donors are, on average, much younger than traditional givers. 60% of crypto users are under 40. Younger people respond to needs publicized on social media. They like supporting a particular cause.
Benefits of crypto giving
- Cheaper transaction costs.
- Attractive tax deductions.
- Donors’ anonymity protected.
Fidelity Charitable reported last year that a third of cryptocurrency investors have donated some of their cryptocurrency to charity. They were driven by the tax benefits and a desire to do good. 46% said it was difficult to find charities that accepted cryptocurrency, and 44% said it was a cumbersome process. Fidelity sees digital assets becoming a strong source of funding for the future. However, there are challenges: navigating volatility, simplifying the process, making the exchange of donations to traditional currency easier, and ensuring security for donors and charities.
The Drum reports that charities that accept cryptocurrencies in the U.S. experience far greater generosity among average crypto donors compared to cash donors. The Giving Block found that the average crypto donation was 82 times larger than the average cash gift, but this will likely decrease as more volume is generated. Emergency appeals for the Ukraine crisis raised millions.
The value of crypto gifts can fluctuate wildly, so churches are advised to put those donations to use quickly or liquidate them into traditional dollars, rather than speculate on their growth.
Last month, President Biden signed an executive order for government oversight of cryptocurrency. Due to the growing popularity of cryptocurrency, there is a possibility that the central bank will create its own digital currency. Surveys show that roughly 16% of Americans (40 million) have invested in crypto. 43% of men 18-29 years old have put money into some form of cryptocurrency. 90 central banks are experimenting with or piloting central bank digital currencies (CBDCs).
Tax ramifications
Crypto donations can be treated as itemized deductions and can possibly reduce your income tax liability. Donating crypto is tax-free and deductible as long as the donation is to a registered charity. Organizations with 501(c)(3) status qualify. The amount that is tax deductible depends on how long the asset was held. Crypto held for more than one year can be deducted at fair market value. Crypto held for less than a year can be deducted at the lower of either the fair market value or your cost basis (the difference in the sale and purchase price).
Avoid scams
Millions of dollars generously given to help Ukraine were lost to thieves in crypto scams.
To verify that crypto donations are going into the right hands, the Federal Trade Commission (FTC) advises that donors do the following:
- Search online for the name of the group plus words like “review,” “scam,” or “complaint.”
- See what Charity Navigator, Charity Watch, or BBB Wise Giving Alliance have to say about the charity.
- Do an online search of the wallet address to verify the real address.
- Remember that once money is given, it cannot be taken back unless someone sends it back to you.
God’s call to seek wisdom and give generously
- “If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given him” (James 1:5 ESV).
- “As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves as a good foundation for the future, so that they may take hold of that which is truly life” (1 Timothy 6:17-19 ESV).
I am on the Board of Directors of TrustBridge Global, which provides expert assistance to donors transferring funds across international borders. I recommend that you consider seeking their advice and services when giving to the people of Ukraine, whether making a traditional or crypto gift. Thank you for your question and generosity!
My new book, Economic Evidence for God: Uncovering the Invisible Hand that Guides the Economy, is now available. As you press into the evidence, it will become more and more exciting as you begin to see the world and even your own economic activity from an entirely new perspective. Money ― and our personal and collective use of it ― can be examined to reveal our faith or lack thereof, and God’s ever-present reality in our affairs. I hope you enjoy it!
Chuck Bentley is CEO of Crown Financial Ministries, a global Christian ministry, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Economic Evidence for God?. Be sure to follow Crown on Facebook.
