Why are Web3’s affluent donating cryptocurrency rather than cash?

crypto donations

As the crisis between Russia and Ukraine continues, crypto has become an important instrument for international contributors who want to help Ukraine. In this context, the success of crypto-native fundraising initiatives reflects a broader trend of crypto holders giving away their coins to assist charity organisations, which has taken off in a significant way this year.

Donations of crypto currency are being sought by charities all around the world to help Ukraine. Since the beginning of the war in late February, Endaoment, a prominent crypto-donating site, claims to have raised over $2 million for organisations supporting Ukraine. Another crypto nonprofit site, The Giving Block, has already received $1.5 million in cryptocurrency donations and began a $20 million cryptocurrency fundraising campaign for its Ukraine Emergency Response Fund yesterday.

According to the campaign’s website, the campaign is supporting a number of accredited charity organisations, including United Way Worldwide and Save the Children.

Nonprofits aren’t the only ones looking to use cryptocurrency as a fundraising mechanism. According to a new website showcasing its relationship with a number of major crypto exchanges, the Ukrainian government has already raised over $54 million in Bitcoin, Ethereum, Tether, Polkadot, and other cryptocurrencies, mostly to pay its military. According to the website, the Ukrainian government’s Ministry of Digital Transformation has spearheaded the drive to bring in donations via cryptocurrency, and the new partner organisations will assist in converting these payments to fiat currency and sending them to Ukraine’s central bank.

While the invasion of Ukraine was undoubtedly a stimulus for donors to donate cryptocurrency, the method grew in popularity across all types of philanthropic initiatives last year.

Endaoment, which permits crypto donations to any 501(c)3 organisation in the United States, claims that donation volume on its platform increased 100 times last year, from $253,000 to $28 million. According to The Giving Block’s annual report, donations soared to almost $69 million in 2021, up 1,558 percent over the previous year.

All of this begs the question: why are people donating crypto rather than cash?

According to James Duffy, co-founder and CEO of The Giving Block, tax benefits are a major motivator.

There is a significant distinction between contributing crypto to an established 501(c)3 organisation and donating to any other cause, such as a foreign government in the case of Ukraine, for U.S.-based donors. The former frequently provides a significant tax benefit to the giver, whereas the latter does not.

Donating money to a legally recognised nonprofit qualifies as a tax deduction, allowing contributors to lower their tax liability by the amount they contribute to charity. Donating assets, such as bitcoin or shares, is even better than giving cash because it provides an additional tax benefit on top of the write-off.

Normally, if a cryptocurrency owner sold their coins after they had increased in value in order to lock in a profit, they would be subject to capital gains taxes of up to 37 percent of the amount sold.They normally don’t have to pay capital gains tax if they give the coins instead. The twofold tax incentive explains why crypto holders, who often want to keep as much of their digital currency as possible in the hopes of it rising in value, are ready to give it away to charities rather than contribute cash.

Kaitlin Welch

Kaitlin Welch manages to cover anything. She is our freelance contributor. Kristie is responsible for covering reporting in finance and business News categories. Kaitlin has experience of 5 years as a reporter to News insights. Kaitlin writes related to the News Category.

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