Did you know that more donations have been made in crypto than fiat? Crypto donation volume increased every single quarter in 2021. Find out how crypto is actually changing the world!
Had we written this article only a few weeks ago, the case studies would have been much less impactful. But in only a few weeks, crypto donations have gone from being a rapidly growing but overlooked trend to almost headline news in the industry. We are, of course, talking about the Freedom Convoy and the Ukraine Crisis.
Before getting to those, it is vital to analyze why and how crypto donations turned into a tsunami in 2021.
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The How and Why of Crypto Donations
The Giving Block is the biggest crypto donation solution on the market and provides the infrastructure to non-profits and charities to raise funds in cryptocurrencies. It is also the author of a highly insightful annual report on donating crypto. This report identified a couple of key trends in crypto donations in 2021.
Donation Trends in 2021
Undoubtedly the biggest and most important trend was a massive increase in terms of all donation-related indicators:
- Donation volumes surged by 1,558% year-on-year to $69,644,535.
- Donation sizes also went up by 236% year-on-year to $10,455.
- Donation volume increased every single quarter in 2021.
Crypto donors were not only larger in number but also were more generous than those donating in fiat currency. 45% of crypto donors gave more than $1,000 to charity in comparison to 33% of fiat currency donors. On average, a crypto donation was a stunning 82 times higher than a fiat currency donation: crypto donations were on average $10,455 compared to $128 in fiat.
The total number of non-profits accepting crypto also skyrocketed by 900%. The average annual value of donation per non-profit increased from $42,000 to $69,644 (+66%).
Which Cryptocurrencies Donors Use The Most?
Ether outperformed Bitcoin for the first time: $30.79 million ETH was donated compared to $25.89 million in BTC. USDC was a distant third with $4.79 million. In total, 85% of all donations were in these three cryptocurrencies.
When Were the Most Crypto Donations Made?
A particularly interesting trend was the rise of crypto donations in the latter half of 2021. 29% of all crypto donations were made in December. Overall, 50% of all crypto donations flowed in November and December 2021. The Giving Block credits the holiday season, as well as its annual year-end crypto fundraising campaign that raised $2.4 million on Giving Tuesday, a 583% increase year-on-year.
The Rise in NFT donations
Massive development in crypto fundraising was the emergence of NFTs as a fundraising tool. Over $12.3 came from NFT projects that donated to dozens of charities. The Giving Block also organized partnerships with NFT artists and campaigns:
- #NFTuesday was a one-day celebration of NFT donations with participation from Sotheby's, Coindesk, Messari, and others.
- Hope for Haiti hosted an auction on an NFT marketplace.
- NFT project Woodies donated 73.8 ETH to Trees for the Future.
- Orangutan Outreach received donations from Bored Ape Yacht Club.
Why Are Crypto Donations Surging?
The Giving Block also identified several reasons why crypto donations exploded in popularity.
First, 2021 was a breakout year for cryptocurrencies, with Bitcoin's bull run setting the stage for new developments like crypto donations. Second, crypto donations provide an attractive way of offsetting capital gains tax liabilities, of which there were a lot in the 2021 bull run. Then there is the fact that altruistic behavioral patterns are especially prevalent among Millennials and Generation Z, who coincidentally are also the earliest adopters of cryptocurrencies. One-third of millennials view themselves as philanthropists.
This would also explain the supply-side growth of more non-profit organizations accepting crypto. Donors take the initiative and offer cryptocurrencies while charities are looking to fill a gap caused by the pandemic. Crypto donations become the next logical step. Moreover, it firmly establishes younger people as a legitimate group of people that engages in charity work.
The Giving Block predicts that crypto philanthropy will grow consistently and sustainably in the future, regardless of the overall market conditions. The company even dares to predict that crypto "has the potential to become the most powerful philanthropic force on the planet in the years ahead." it has already made the transition from fringe to mainstream and the narrative will only strengthen, something that has already been proven true in the first two months of 2022.
Donations and Taxes
A key incentive to donate your crypto is lowering your capital gains tax liability. If you're lucky enough to have that problem, crypto charity is a tax-efficient solution since it is tax-deductible in countries like the US, the UK, Canada, Australia, and others. There are two distinct scenarios here for Americans:
- If you held the cryptocurrency for more than one year before donating, you will be eligible for the itemized charitable deduction for the fair market value of the cryptocurrency at the time of contribution.
- If you donate after holding the cryptocurrency for less than one year, you are still eligible for the itemized charitable deduction.
However, gifts and crypto crowdfunding do not count towards the deduction. Ideally, you want to donate long-term appreciated assets to deduct the coin's fair market value. Short-term appreciated assets also work since they lower the cost basis. Worst case scenario, you can always harvest losses in a losing position.
Pros and Cons of Crypto Donations
While the pros for you as a donor are pretty obvious, it is important to understand which incentives charitable organizations themselves have to add crypto to their portfolio.
First, they can tap into a new group of donors, as most crypto holders will be on the younger end. That group has been traditionally tough to reach and was usually not in the financial position to contribute as much as they can now. Moreover, when crypto philanthropists give, they don't skimp, as we saw. On the contrary, they are much more generous, incentivizing a fast adoption among organizations. And finally, cryptocurrencies are entering the mainstream, and the same FOMO feeling that rules trends like the metaverse is present in crypto donations too.
However, there are risks as well:
- Crypto is still comparably niche and, much more importantly, not easy to understand or handle for non-tech-savvy folks.
- Crypto is volatile, and non-profits may not want to become involuntary traders.
- Accounting standards and reporting of crypto is not that straightforward or simply unknown on the part of the organizations.
- Some may not want to accept anonymous donations.
Still, the data doesn't lie, and charitable organizations are clearly weighing the pros heavier than the cons.
Case Studies of Crypto Donations
The most fascinating part, though, are the real-world cases that have emerged over the last weeks and months.
Although there were some smaller examples like the Edinburgh Dog and Cat Home or the US national figure skating body, the first bigger and more prominent case of crypto donations was the Assange DAO. It is dedicated to Julian Assange, the controversial Wikileaks founder, who is facing charges and extradition to the United States. The DAO has raised over 12,000 Ether by selling different NFTs created by Assange himself.
An even more high-profile case was that of the Freedom Convoy in Canada, which generated a lot of attention (or outrage, depending on your viewpoint). As a quick recap, in case you missed it: a group of truckers protested vaccination mandates by the Canadian federal government, blocking roads and a bridge in the process. Naturally, this raised interest from supporters and opponents, with the pro-convoy side donating more than $10 million to support the truckers. However, the money was confiscated by the Canadian government:
This prompted crypto influencers to point out the benefits of crypto donations in this case:
The story's aftermath is even more interesting. As a consequence, Canada decided to clamp down on crypto, introducing a dubious Emergencies Act to target crowdfunding platforms, including crypto crowdfunding, that was specifically designed to prevent such donations to "undesired" groups.
The most recent and most important example is that of donations flowing to the Ukrainian government, military, and charities as a result of the Russian attack on Ukraine. At the time of writing, $37 million in BTC, ETH, USDT, and other coins have flowed to Ukraine. Furthermore, Ukraine DAO, led by Russian oppositionists and Pussy Riot (anarchist feminist group) lead singer, Nadya Tolokonnikova, is selling an NFT with a Ukrainian flag to raise money. You can follow the auction here.
Conclusion
Crypto donations are not only here to stay, they are here to grow. As we can observe in real-time, crypto can also help save lives instead of offering financial freedom. So expect the narrative around crypto only to grow stronger in the future.
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