Accepting Cryptocurrency Donations for Not-for-Profits

March 26, 2019

At a glance 

  • Main takeaway: Accepting cryptocurrency may appeal to your donor base, introduce new funding streams and lead to more and larger donations. However, the risks and safeguards must be considered and addressed.
  • Impact on your business: What began with Bitcoin has grown to include more than 20,000 cryptocurrencies. Their widespread use and popularity begs the question – should charities be accepting cryptocurrency donations?
  • Next steps: Aprio’s nonprofit professionals can help charitable organizations develop new strategies for funding operations, while providing assurance to donors, lenders and board members that they are acting with fiscal responsibility.  

Schedule a consultation with Aprio today 

The full story: 

Cryptocurrency is changing charitable giving. Over the past few years, the use of cryptocurrency to fund donations to nonprofits has risen dramatically.

The nation’s largest donor-advised fund, Fidelity Charitable, received $69 million in cryptocurrency donations in 2017 from 169 donors. Ripple donated $29 million of its own digital currency in 2018 to to fund 35,000 public school classroom project requests. At the time, it was the largest-ever cryptocurrency gift to a single charity.

Beyond Bitcoin

What started with Bitcoin has grown to include more than 20,000 cryptocurrencies today. The widespread use and popularity of this form of payment begs the question – should charities be accepting cryptocurrency donations?

Benefits and risks of cryptocurrency donations for nonprofits

Accepting cryptocurrency may present numerous 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
  • Reviewing your gift and investment policy to address receiving, valuing, and holding cryptocurrency
  • Reviewing internal control policies and procedures to address valuation, monitoring and processing of cryptocurrency
  • Understanding your financial reporting framework and how to handle accounting for cryptocurrency in accordance with that framework
  • Training management and staff on handling cryptocurrency
  • Disclosing cryptocurrency assets in your statement of financial position and footnotes

Should you decide to accept cryptocurrency donations, updating your organization’s gift acceptance policy is a necessary first step.

Further guidance for nonprofits

The AICPA has published detailed guidance for nonprofits. Among other items, it offers the following example of a gift acceptance policy that addresses cryptocurrency donations:

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.

Sell cryptocurrency assets upon receipt

When accepting cryptocurrency donations, it’s important to sell the digital assets upon receipt as the asset price can be highly volatile. This helps to ensure that your organization receives the financial value intended by the donor at the time of the gift, avoids potential fluctuations in the market and allows 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.

How to accept cryptocurrency at your nonprofit

There are five basic steps to accepting cryptocurrency as a donated asset.

  1. Establish an account with a reputable broker to receive the donation.
  2. Provide the account number to the donor.
  3. Receive the donated asset.
  4. Provide instructions to sell the asset and wire the proceeds to your bank.
  5. Determine the gift value and acknowledge the gift.

Gift value is determined by the actual price at the time of the contribution, the closing price for the day of the contribution, the volume-weighted average price, and the average of the high and low price.

The bottom line 

Cryptocurrency will likely be with us for the long term and presents another way for donors to contribute to a cause or program. 

Whether or not your organization decides to accept the cryptocurrency donations, careful consideration should be taken regarding the risks and safeguards of its acceptance.

Schedule a consultation with us today to learn more about accepting cryptocurrency donations at your nonprofit.

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