The advent of cryptocurrency has brought about an ecosystem of wealth overnight. But how down does this new class of legal tender bring about ultra-wealthy digital currencies towards philanthropy?
The answer to this question will be found in this guide.
In this guide, we will examine the relationship that exists between cryptocurrency, blockchain, and charitable giving. This guide will also reveal how crypto-billionaires were made. Examples of these billionaires are Mark Zuckerberg, Vitalik Buretin, and others, who are channeling their wealth towards an idea or cause.
You will also learn how popular crypto assets like Bitcoin and Ethereum promote transparency, accountability, and accessibility in donations.
So, just grab a drink and read with me.
Social media is the in-thing now. In fact, we cannot live our lives without them. These social media platforms have helped increase philanthropic outreach and made it easier for people to participate in charitable events that they care about.
Recently, there has been an increase in charity donations to non-profit organizations and fundraising events on social media platforms such as Facebook, TikTok, X (formerly known as Twitter), and Instagram.
According to specialists, social networking sites is a potent platform for charitable organizations and activists to exchange audio and video materials, mobilize assistance, and demand swift action.
Programs can gain thousands of viewers almost overnight by going viral. This places social media channels at the forefront of participation and philanthropic discourse.
Thus, popular social media posts aim to capture the attention of people about fundraising initiatives for healthcare, humanitarian assistance, famine relief, animal protection, and other typical issues that elicit emotional responses from people.
So, in this case, social media effectiveness cannot be underestimated when it comes to connecting people to projects that align with their belief systems.
For example, a short time after the bear run’s top in the month of March 2022, hundreds of individuals gave close to $7 million in cryptocurrency to Ukraine to support the nation’s defence against the Russian invasion.
Additionally, more than 1,000 organizations gave the equivalent of 125 million dollars worth of bitcoins through the cryptocurrency donations startup “The Giving Block” in 2018.
In the next ten years, The Giving Block anticipates that cryptocurrency donations will top $10 billion.
According to experts, the personal relationships made possible by online platforms between funders and campaigns encourage deeper involvement. By identifying with a nonprofit’s cause through social media posts, people feel committed. Constant generosity is motivated by the feeling of belonging.
Also Read: Wikipedia Community Votes Against Accepting Crypto Donations
Why Does Crypto Philanthropy Appeal to Donors So Much?
Crypto fundraising is very different from conventional charitable donations. These variations are altering the characteristics of donors, funding strategies, and even the motivations for giving.
The increase in the quantity of these cryptocurrency gifts indicates that this kind of support will likely remain important to the nonprofit industry and even change the landscape of charity.
The affordability of cryptocurrency for charitable giving has prompted new generations of young individuals to think about generosity and assisted smaller charities in attracting donations, but as digital currencies become more ingrained in our daily lives, these could just be the first steps.
Here is how crypto philanthropy appeals so much to donors:
1. High Response To Social Media Publicized Contents
Young, knowledgeable about technology folks who promote initiatives that are getting more publicity online make up the majority of cryptocurrency donors.
These donors might read touching tales and develop an emotional connection to certain incidents. For instance, accounts of the Russia-Ukraine war published on Twitter have generated about $100 million in cryptocurrency contributions to aid Ukraine.
Popular non-profits have received more attention than traditional donations.
However, donors have tended to prefer giving to large worldwide charities that are adept at publicizing their achievements, but this trend may be at the expense of smaller but no less deserving charities that also need the funding.
2. Cheaper Transaction Costs
Crypto donations are cheaper in comparison to other methods existing in traditional finance. Also, crypto transactions dodge third-party or government intervention, helping them avoid additional charges and taxes.
Long-term valued assets can be directly donated to raise more money for charity, and donors and non-profits may be able to avoid paying transaction costs built into traditional banking platforms.
Based on the 2020 “Global Trends in Giving Report,” 63% of donors globally picked credit or debit cards as their preferred way of donating because of reduced fees for transactions.
Meanwhile, the method of processing costs on credit card deals, which are deducted directly from the donation amount, may vary from 2.2% to 7.5%, according to Charity Navigator.
For example, a typical $2,000 bank transfer from the US to India could incur an additional $30 to $50 in processing fees. When sending the same cash using the Ethereum blockchain, the gasoline expenses can range from $10 to $15.
Additionally, cross-border transfers of fiat currency might take hours or even days, but transactions in cryptocurrencies can be completed in as little as a couple of minutes or seconds.
3. Attractive Tax Deductions
Cryptocurrency donations to non-profits are deductible as income in several nations.
However, transferring or converting cryptocurrency to fiat may result in capital gains taxes.
For example, someone who invests can write off the actual market value of a cryptocurrency at the moment of giving by directly donating a long-term valued asset. You can write off the value of your cryptocurrency if, for instance, you purchased it for $500, which increased to $1,000 over time.
This way, you can save between 20% and 30% on taxes.
4. Donor’s Privacy
Targeting current donors is simpler for charities than finding new ones. As a result of the mounting demand to provide, donors frequently want to stay nameless. Similar to this, substantial donations might necessitate meeting KYC and other personal identification criteria.
Despite donating millions of dollars, contributors can maintain their privacy by making a Bitcoin donation. Such anonymity, nevertheless, might only persist for a short time as several nations tighten their rules on cryptocurrencies.
Challenges In Crypto Philanthropy
Practically speaking, crypto philanthropy, as good as it sounds, is faced with challenges. Don’t forget that donors are dealing in crypto, and the crypto market is affected by volatility.
Therefore, as an organization, you need to decide if you plan to hold on to your crypto, change to stablecoins, or sell immediately for fiat. But while holding on for a long time, charity organizations might incur losses.
Crypto Scams:
Some pitfalls for crypto donors include scams, fraud, and theft. This is because the crypto industry is porous, and crypto donors might fall for sending their donations to bad actors.
So, legalizing the application of cryptocurrencies for charitable giving and collaboration could open doors for fraudsters, who could set up phoney non-profits and solicit contributions in cryptocurrencies.
Also Read: How to Protect Against Crypto Scams and Ponzi Schemes
Regulatory Compliance:
By increasing engagement, promoting openness, and enabling organizations to profit from the rise of digital assets, digital currencies have the capacity to significantly change charity.
Charities that take cryptocurrency must adhere to know-your-customer (KYC) regulations as well as reporting requirements, which boosts costs.
The continued tax procedure is likewise still a mystery. This is because we are yet to see the latest crypto regulation and its implications for crypto in the future. However, non-profit organizations need to adhere to regulatory standards.
Conclusion
Sensible remedies, nevertheless, are required to remove technical barriers to cryptocurrency donations and clear up any legal ambiguities. The potential of Bitcoin charity may be fully realized to the benefit of global improvement in society by effectively establishing supporting networks.
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