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How to Accept Cryptocurrency as a Charity: The DIY Approach vs. The Better Giving Way

Posted: June 9, 2023

Author: Tim Stirrup

DIY Plan for a Charity to Accept Cryptocurrency vs Better Giving:

If you wish to add a new and growing method of donations, by accepting cryptocurrencies as a nonprofit, there are a couple of ways you can make this happen.

You can either choose a donation processor like Better Giving to accept the donations, or set up your own systems to do this yourselves.

Here are the two options:

  • Register to Better Giving
    • Use the Better Giving marketplace link or better still, embed a donation form on your own website. No cost, no subscriptions. No problem.
    • Tell your donors about it and spread the news
    • Wait for the dollars to be seen in your personal nonprofit dashboard.
    • That’s it - all the rest is taken care of by Better Giving

OR

  • Create your own DIY process inside your nonprofit and on your nonprofit website.

Phase 1: Research & Planning

  • Identify Legal & Regulatory Requirements: Research tax laws and regulations in both countries. As a charity, it's important to understand how accepting and reporting cryptocurrency donations might impact your tax status.
  • Evaluate Risks & Rewards: Understand the volatility of cryptocurrencies and potential risks and rewards involved. Consult with a financial advisor if necessary.
  • Identify Suitable Cryptocurrencies: Decide on the cryptocurrencies you will accept (e.g., Bitcoin, Ethereum). Consider their popularity, security, and stability.

Phase 2: Infrastructure & Setup

  • Choose a Cryptocurrency Payment Processor: A payment processor will simplify the process of accepting cryptocurrency and converting it into traditional currency. Examples include BitPay, CoinGate, and CoinBase Commerce.
  • Set Up Wallets & Addresses: Each type of cryptocurrency requires a unique address or wallet. Ensure these are secure and private.
  • Implement Cryptocurrency Payment on Donation Platform: Integrate your chosen payment processor with your online donation platform. Ensure your website can support this new form of payment.
  • Develop Procedure for Manual Donations: Create a protocol for accepting cryptocurrencies offline or in person.

Phase 3: Operations & Staffing

  • Hire/Assign Dedicated Staff: Depending on the size of your charity and expected volume of cryptocurrency donations, it may be prudent to have dedicated staff. Their roles may include monitoring donations, managing wallets, recording transactions, liaising with payment processors, and maintaining legal compliance.
  • Train Staff: Staff members should be trained on how to manage cryptocurrency donations. They should understand the value, volatility, security needs, and legal considerations.
  • Establish Conversion Practices: Decide when and how often to convert cryptocurrencies into traditional currencies. This practice should balance the need for operational funds with the potential for value appreciation.

Phase 4: Donor Management

  • Donor Recognition: Develop a system to recognize cryptocurrency donors.
  • Donor Receipting: For tax purposes, donors will need receipts. These should detail the amount of cryptocurrency given, its value at the time of donation, and the date of donation.
  • Donor Confidentiality: Ensure policies are in place to respect the privacy of cryptocurrency donors if they wish to remain anonymous.

Phase 5: Marketing & Promotion

  • Educate Donors: Explain cryptocurrency donations on your website and other materials. Discuss the benefits and drawbacks for donors.
  • Promote Cryptocurrency Donations: Highlight the option to donate cryptocurrencies in your fundraising campaigns. Consider targeting cryptocurrency communities who may be interested in donating.

Phase 6: Review & Adjustment

  • Monitor & Review: Regularly review the performance of your cryptocurrency donation program. Consider the number of donations, the value of donations, the cost of operations, and the impact on your charity's financial stability.
  • Plan for Adjustments: Be prepared to adjust your policies and practices based on the performance of your cryptocurrency program and changes in the cryptocurrency market or legal environment.

Phase 7: Tax

  • Monitoring: Ensure you have the records available for reporting on each donation and donor to the IRS
  • Reporting: Carry out that annual task of reporting the transactions and donor qualification