Bitcoin’s volatility not stopping charities from boarding the crypto-donations hype train
What makes Bitcoin, “BITCOIN?” From eye-catching rallies to deep dives, from the infamous Silk Road debacle to mainstream recognition, Bitcoin has been through it all. In fact, what’s attractive about the cryptocurrency and the market it represents is that the price pulls do not always happen as predicted. It is this inherently volatile nature that is appealing to many in the industry.
Eleven years and numerous exaggerated obituaries later, Bitcoin is still going strong. The ‘Digital Gold’ still holds on to an eye-boggling market share. It’s 2020 and needless to say, the creation of Bitcoin has been revolutionary in many ways. Without any overlord, this new form of digital money, one that is not linked to any government or central bank, makes it possible for industries across different sectors to take control of their money. It is for this reason many are now extensively leveraging Bitcoin and other cryptocurrencies by extension.
The appeal of cryptocurrencies hasn’t been lost to charities across the world either. Due to factors such as financial inclusion, environment, education, health, human rights, open-source software, democracy, and governance, many charities have now initiated the acceptance of crypto-donations.
The crypto-space has definitely matured, but Bitcoin is relatively young. Volatility and price swings are inevitable. Then, what about the ramifications of this high volatility on cryptocurrency donations?
Fidelity’s humanitarian arm, Fidelity Charitable, has received over $100 million in crypto-donations since its inception. Volatility did not have much effect in Fidelity’s case. Its latest report published in 2019 stated that despite volatility in the market, Fidelity Charitable investment growth continued to be in the “positive territory,” with an additional $5 billion in net dollars available to be granted to charitable organizations as a result.
The report added, “Though cryptocurrency values cooled off considerably by the end of 2018, they began the year at a peak. Fidelity Charitable’s ability to accept cryptocurrency donations, including bitcoin, allowed these donors to eliminate any capital gains taxes and give the full fair market value to charity.”
Wounded by the crypto-bubble, what was initially anticipated to be worth around $86 million at the time, turned out to be $55 million after the great fall.
The Bitcoin-only charity, Pineapple Fund, was launched by an anonymous benefactor who went by the name ‘Pine,’ often touted as an experimenter in philanthropy. After the project accomplished its ultimate mission of collecting 5104 BTC, the Pineapple Fund bid farewell. Nearly $55 million was donated to 60 different projects, including the Free Software Foundation, the Electronic Frontier Foundation, and The Water Project.
Often touted as the next big thing, Bitcoin and other cryptos have been capitalized on by charities and non-profits, parties who remain one of the early adopters of crypto-donations.
Charity is a conscious act of kindness. The gift of giving without expecting anything in return is wonderful and rewarding. But, since the question is of accepting cryptos for charitable cases, the question is - are we doing it right?
Fiat + Crypto means - maximizing the volume of donations, accessibility to an even wider global audience, a new generation of supporters, and a younger demographic helping people in need. Unlike traditional financial entities, an important aspect that stands out in this new type of funding is the efficiency factor. Faster processing times and transparency at a lower transaction fee have paved the waves in favor of cryptocurrencies.
When Venezuelans were in dire need of funds amid the devastation caused by the bolivar’s drastic inflation, non-profits turned to cryptocurrencies. Moving money across borders is also one of the major benefits of leveraging cryptocurrencies, thus dodging banks and institutions that handle remittances.
John Karr, COO at SophisticatedInvestor.com, spoke to AMBCrypto on the subject and said,
“Despite the volatility of something like Bitcoin, donors do have the substantial tax incentive of donating with crypto. Akin to stock donations, donors who transfer appreciated assets such as Bitcoin to a charity pay no capital gains and can write off the donation in its entirety”.
BCF’s Director of Communications, Simone Wu, spoke to AMBCrypto and said,
“..we believe crypto is a great substitute to the existing financial system. There are 2 billion unbanked population in the world. Crypto is a way to offer more efficient financial service with lower threshold, bring equality to the world. Donations in cryptocurrencies can help raise awareness of technology for social good... By combining cryptocurrency and charity, we want to emphasize that there is no right or wrong in technology, only in people using it. People should not be afraid of it but to embrace it and use if for good.”
Addressing the volatility factor inherent to cryptocurrencies, Wu elaborated,
“There is volatility in price for most of the cryptocurrencies. There are also exceptions, the stablecoins, whose prices are pegged to some kind of fiat currency or a stable value. We have noticed the change in price in the process of charity projects. Thus, we consider using stablecoin. We have already issued 2 stablecoins, the Pink Care Token and the Humanity First Token, to ensure the price change won’t affect the value passed to the end beneficiaries.” As listed on BCF’s website, there are nearly 19
charity projects, most of which included supplies for children in underdeveloped nations across the world.
The cryptocurrencies used by BCF were Binance Coin [BNB], Bitcoin, Ether, PAX, XRP, and two other stablecoins, namely, Pink Care Token [PCAT] and Humanity First Token [BHFT]. Interestingly, the PCAT, despite being a stablecoin, is not backed by fiat currency.