Cryptocurrency is becoming a more common part of nonprofit fundraising. In 2024 alone, crypto donations topped $1 billion, and more than half of America’s largest charities now accept digital gifts. Interest is still growing, but many nonprofits still rely on gift acceptance policies that focus only on traditional assets like cash, stocks, or real estate.
Without a clear policy for cryptocurrency, organizations could miss out on opportunities to engage new donors, particularly younger supporters who prefer digital giving. Reviewing and updating gift policies now can help nonprofits stay prepared as cryptocurrency becomes a larger part of charitable giving.
Understanding Cryptocurrency
Cryptocurrencies are digital assets that operate outside of banks and traditional financial systems. They are verified and recorded through decentralized networks. Because they move independently of banks, crypto transactions are often faster and less expensive, which can make giving easier for donors around the world.
Gifts of appreciated crypto assets often allow donors to avoid capital gains tax, which can lead to larger contributions. There are risks to consider too. Cryptocurrency values can change quickly. A donation worth $1 million today could be worth far less, or far more, a few days later. Even with those risks, there are strong reasons to accept cryptocurrency. Lower transaction costs, faster processing, and potential tax advantages make it an appealing option for both donors and nonprofits.
Guidance for Accepting Cryptocurrency Donations
For most nonprofits, gift acceptance policies are a key part of protecting both the nonprofit and the donor. They provide a way for evaluating and managing donations, especially those that carry legal or financial risks.
Many nonprofits already have policies in place for other assets, like stock, real estate, and even gift cards. However, cryptocurrency is often overlooked. As digital giving becomes more common, organizations will want to create clear policies and practices before accepting cryptocurrency donations:
Policy and Governance: The first step for a nonprofit thinking of accepting cryptocurrency donations is to engage stakeholders. Organizational leaders and Board members will want to work together to update the gift acceptance policy. From there, nonprofits can define acceptable assets; there are thousands of cryptocurrencies, but many organizations limit acceptance to widely recognized options like Bitcoin and Ethereum. Policies can also address if gifts will be held or immediately liquidated, and establish a standard timeline for that process. Finally, organizations will want to set donor verification protocols and approval thresholds. Because cryptocurrency gifts may be made anonymously, that could raise additional recordkeeping requirements.
Operational Procedures: Once updated policies are in place, nonprofits can decide how cryptocurrency donations will be received and managed. To accept crypto gifts, many organizations establish a secure digital wallet or work with a third-party payment platform such as BitPay or Engiven. Nonprofits will also want to review internal controls, including systems access, segregation of duties, and two-factor authentication. This can help protect resources from unintentional errors as well as fraud. A cryptocurrency application form to vet potential donor information and a donor-facing reference guide can also be helpful.
Additional Considerations: Nonprofits focused on environmental sustainability may want to acknowledge the energy consumption associated with certain types of cryptocurrency mining. Including a brief statement in the gift acceptance policy can help provide transparency for your donor base.
Tax Implications
The IRS treats cryptocurrency as property, not cash. This means that donors who give appreciated crypto assets can usually deduct the fair market value of the gift, similar to gifts of appreciated stock. For donations valued at more than $500, donors must complete Form 8283, and the nonprofit must sign it to acknowledge receipt.
When a nonprofit receives a cryptocurrency donation, it records the gift as noncash property. If the donation is sold right away, it may show up as cash on the organization’s financial statements, but the underlying transaction needs to be fully documented. If the organization sells or converts the cryptocurrency within three years of receiving it, it may need to file Form 8282 to report the sale.
It’s also important to handle donor acknowledgments correctly. Nonprofits should provide a receipt confirming the donation but should not assign a dollar value. Donors are responsible for determining the fair market value for tax purposes.
Donors who have held cryptocurrency for more than a year generally qualify for a deduction based on the asset’s full fair market value. Those who have held it for less than a year can usually deduct only what they originally paid for it. Understanding these rules can help nonprofits work more smoothly with donors and avoid surprises during tax season.
Looking Ahead
Cryptocurrency is changing how donors think about giving. Nonprofits that take the time to update their policies and processes will be prepared to accept digital gifts in the near future. For more information on cryptocurrency issues, contact PBMares Not-for-Profit Partner Bo Garner.
