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Cryptocurrency has gone mainstream, and if you\u2019ve been sitting on the fence about accepting donations in virtual currency, it\u2019s time to make a decision. But before your not-for-profit says \u201cyes\u201d to a Bitcoin (or other cryptocurrency) gift, make sure you understand the issues involved \u2014 including the risks.<\/p>\n
Virtual currency = risk<\/strong><\/p>\n Cryptocurrency refers to a decentralized form of digital currency that\u2019s tracked in a blockchain ledger. Unlike traditional currencies, the ledger doesn\u2019t reside with a central authority, such as a bank or government, but across public peer-to-peer networks. The value of cryptocurrencies derives in part from its scarcity. In the case of Bitcoins, for example, the supply is limited to 21 million \u201ccoins.\u201d<\/p>\n One of the most significant risks related to cryptocurrencies is their price volatility. The price for Bitcoin can shift more than 10% in a single day. Imagine a donation that drops that much in value within hours of receipt. Of course, cryptocurrencies also can quickly appreciate in value dramatically. That\u2019s one reason owners might want to donate them \u2014 to avoid capital gains tax on the appreciation.<\/p>\n Third-party facilitators can help<\/strong><\/p>\n Given such price volatility, you need to decide whether your nonprofit can assume the risks. One way to manage them is to accept cryptocurrency through a third-party facilitator, such as The Giving Block, BitPay or Engiven. These platforms allow nonprofits to almost immediately convert crypto donations into dollars \u2014 before their value can fall.<\/p>\n Facilitators typically charge a small fee, similar to credit card transaction fees. Check with your financial institution before signing an agreement with a facilitator, though. Some are wary of transactions involving players in the virtual currency industry.<\/p>\n If, on the other hand, you decide to accept cryptocurrency donations directly, and perhaps benefit from appreciation, you must create a \u201cdigital wallet\u201d through a bank or mobile phone app. Wallets store the public and private \u201ckeys\u201d required to send and receive coins. And you\u2019ll need to implement internal controls and security measures to secure your keys and wallets.<\/p>\n Your reporting obligations<\/strong><\/p>\n When it comes to reporting, the IRS says nonprofits should treat these obligations as noncash contributions on Form 990 and, if applicable, Schedule M. You must file Schedule M if you receive more than $25,000 in noncash contributions or contributions of art, historical treasures or similar assets, or qualified conservation contributions.<\/p>\n If you accept cryptocurrency directly and convert it to cash within three years after receipt, you must file Form 8282, Donee Information Return<\/em>, and give the donor a copy. If the donation is worth more than $5,000, your organization will need to sign the donor\u2019s Form 8283, Noncash Charitable Contributions.<\/em><\/p>\n Prepare now<\/strong><\/p>\n If you haven\u2019t yet been approached by a supporter offering a cryptocurrency contribution, it\u2019s only a matter of time. So prepare now. You\u2019ll need new security and compliance policies and should make a gift acceptance policy addendum. Contact us for more information and help.<\/p>\n \u00a9 2021<\/em><\/p>\n <\/body> Cryptocurrency has gone mainstream, and if you\u2019ve been sitting on the fence about accepting donations in virtual currency, it\u2019s time to make a decision. But before your not-for-profit says \u201cyes\u201d to a Bitcoin (or other cryptocurrency) gift, make sure you understand the issues involved \u2014 including the risks. Virtual currency = risk Cryptocurrency refers to […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,15],"tags":[8,11,12],"class_list":["post-15574","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-not-for-profit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=15574"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15574\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=15574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=15574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=15574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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