As the Russia-Ukraine war rages on, donors abroad are turning tocryptocurrencies to support the country. This year has seen a big increase in the number of people giving away their coins in order to support charitable causes.
There are charities around the world that are asking for donations in cryptocurrencies. Since the beginning of the war in Ukraine, Endaoment has raised over $2 million for charities. The Giving Block has already taken in over 1.5 million dollars in donations and is currently raising money for the Ukraine Emergency Response Fund, which supports a variety of nonprofits.
It's not just nonprofits who want to use it as a donation tool. According to a new website detailing its partnership with a number of major exchanges, the Ukrainian government has already raised over $54 million in cryptocurrencies to fund its military. The Ukrainian government's Ministry of Digital Transformation has spearheaded the effort to bring in donations throughcryptocurrencies, and the new partner companies will help convert these donations to fiat currency and send them to Ukraine's central bank, according to the website.
TheUkraine invasion has certainly acted as a catalyst for donors to give away crypto, but the mechanism surged in popularity last year across all types of charitable causes.
Donation volume on Endaoment's platform increased 100x last year, from $253,000 to $28 million. The Giving Block saw a 1,558% increase in donations in the year after, according to its annual report.
Why are donors giving away coins instead of cash?
James Duffy, co-founder and CEO of The Giving Block, said tax incentives are a key motivating factor.
If you want to give to a charity and you have appreciatedcryptocurrencies, it's the most tax-incentivized way to give.
There is a key difference between donating to an established 501(c)3 organization and donating to a foreign government. The latter often results in a tax benefit for the donor, while the former does not.
Donate cash to a legally-recognized nonprofit and you can reduce the amount of taxes you owe by giving to charity. Donating assets, like stock, can be even more beneficial than giving away cash because it provides another important tax incentive.
If you sell your coins after they have appreciated in value, you will have to pay capital gains taxes of up to 37%. They don't have to pay capital gains tax if they donate the coins. The dual tax incentive helps explain why holders of digital currency are willing to give it away to charities instead of keeping it.
Donor-advised funds allow individuals to take an immediate tax deduction when donating assets to a dedicated account that can appreciate in value over time. The account holder can deploy the funds in the account to nonprofits at their discretion, and do not need to use all the capital. Endaoment, The Giving Block, and Fidelity's charitable giving arm all offer donor-advised funds that can accept coins.
Tax incentives can be a motivator for donors, but they are not the sole motivator. He said that donors who give stock or cash are more likely to donate larger sums.
If you're interested in being a part of something that's going to change the world, you're probably interested in being in the early stages of the industry.
A sense of identity and community is a central factor in driving participation in the space. Even though most charities end up converting the donated coins into dollars, they are still using this cultural phenomenon.
Any nonprofit that creates a space for users of the digital currency is better than the others.
Although Save the Children and other large nonprofits have been able to build out donation programs, many mid-sized and smaller charities haven't pursued the option. According to Giving USA, the U.S. charities received an estimated total of over $470 billion from donors in 2020.
Regulators including the U.S. Securities and Exchange Commission have noted a link between the association of fraud and scam withcryptocurrencies. Others don't have the technology or infrastructure to accept donations.
Small nonprofits without a robust internet presence sometimes think they can take a chance on a lottery ticket. He warned against this line of thinking, saying nonprofits without much of an online presence should stick to the nuts and bolts.
The Endaoment and Giving Block platforms had the most popularcryptocurrencies used for donations last year. It became the most-donated cryptocurrencies on both platforms last year.
The charitable NFT projects also gained traction among donors. The Endaoment platform was used by popular NFT artist Pplpleasr to donate the proceeds from her art to the Stand with Asians Community Fund. Endaoment and The Giving Block saw nearly $20 million in combined NFT donations on their platforms.
Long-term donation streams for nonprofits can be unlocked by NFTs. Metaplex allows creators on its platform to support charities with recurring royalty payments through their NFT sales through an integration with donation startup Change.
Web3 creators see NFT donations as an opportunity to leave a legacy through their work.
This is not about traditional philanthropy. Nigam said that the smart contract technology allows impact to live in the product itself.
We will see NFT collections go live, and they will set a goal of 2% going to climate change for life. The initial intent of the creator is what gets them excited. The number one goal for nonprofits is to unlocked recurring channels for giving.
Although the popularity of donations in the past year has been growing, the quick movement of funds to support Ukraine this month could be a catalyst for the community to support other causes.
Vitalik Buterin is at a Hackathon.
Vitalik Buterin spoke about the potential unlocked by the recent campaigns to support the country in a conversation hosted by the team behind the coin.
A lot of people who are core to the space want to support freedom, support more democratic ways of organizing, and generally support people's ability to peacefully have their own.
He said that the attention of the community has been galvanized by the fact that many of the people working on the projects are Ukrainian.
Buterin said that the success of the donation campaigns to support Ukraine has shown that it can be done quickly.
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