How to accept crypto donations: Complete nonprofit guide

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Cryptocurrency, often abbreviated to “crypto,” is a relatively new form of mainstream digital currency. Has your nonprofit thought about crypto and how to incorporate it into your fundraising programs yet?

If not, you’re not alone, but you probably are missing out on valuable gifts.

According to a 2023 Pew Research survey, 88% of Americans have heard about cryptocurrencies, and 17% say they have invested in, traded, or used crypto at some point. These assets have gained even more prominence and widespread acceptance through the recent launch of Bitcoin ETFs by a diverse range of financial service providers including Fidelity and Schwab.

By learning more about crypto and beginning to solicit it, nonprofits can tap into a new source of donations and reach younger, more diverse, and more tech-savvy donors.

Wondering how to get started? We’ve got you covered. This guide will orient you to crypto fundraising and explain how to launch your first crypto giving efforts.

Understanding cryptocurrency for nonprofits

Let’s start by answering a few fundamental questions:

What is cryptocurrency?

Cryptocurrencies, also called crypto, are digital or virtual forms of money. Many of them can be used to buy goods and services, but they’ve really taken off as a new type of investment vehicle for both short- and long-term gains, similar to property or stocks.

With a market cap currently above $1 trillion, Bitcoin (BTC) is by far the most prominent and popular cryptocurrency. But there are more than 16,000 different cryptocurrencies in circulation, including notable examples Ethereum, Tether, and Cardano.

Why is crypto unique?

Crypto is differentiated from other currencies by its decentralization. No single entity is in charge of them, and there is no need to rely on banks to hold or process crypto assets to complete a transaction. 

The available supply of a given cryptocurrency is typically not mutable. It’s not determined by external factors or monetary policy but rather hardwired into the crypto’s code.

Instead of relying on a centralized institution, cryptocurrencies use a software-based ledger of transactions, known as a blockchain, to record and confirm transactions. Most cryptocurrencies make transactions public, though the sender and receiver can be difficult to identify since they’re attached to wallet addresses and transaction IDs (TXID) rather than names.

Where does crypto come from?

The sources of cryptocurrencies can vary widely. 

A new cryptocurrency will typically be launched by issuing an initial supply to interested participants and supporters. Over time, more tokens will be generated and circulated, expanding the supply. These new tokens are often provided as a reward to members of the computer network whose processors are supporting the crypto’s blockchain and verifying transactions, a process referred to as mining.

This creates an effective cycle of incentives. If the crypto rewards are considered valuable, more computers will join the network. As more computers join the crypto’s network, its blockchain becomes more reliable and trusted, driving up its value.

You can learn more about the details of how one of the most popular cryptocurrencies, Bitcoin, is mined in Investopedia’s guide.

What considerations and risks should nonprofits keep in mind?

There are some potential risks and challenges to consider when accepting crypto donations for your nonprofit.

• Market volatility: Crypto markets are volatile, and the value of crypto could go up or down at any given moment. That means if you accept crypto and don’t immediately convert it to cash, its value can be greatly affected. Decide how to navigate this risk and make clear acceptance policies similar to those you’d create for accepting gifts of stock.

• Donor anonymity: Cryptocurrency donations often appear without a name attached, complicating gift substantiation. It’s harder to steward anonymous donors, so you’ll need to implement ways to capture as much donor info as you can to grow these relationships and solicit future gifts.

• Unregulated space: Crypto regulation is highly likely to mature and evolve, especially in the wake of recent high-profile fraud cases and its adoption into dedicated ETFs by regulated financial service providers. Best practices for handling crypto in legal, accounting, and tax fields should be monitored for developments.

• Effects on climate change: The environmental impacts of devoting processing power to crypto mining is another hot-button topic that should similarly be monitored over time.

• Illegal activity: Crypto allows for anonymity, which has raised some red flags for potential illegal activity. While this potential for illegal activity and fraud exists with other forms of giving, it’s a common talking point that you’re likely to encounter.

The good news is the majority of these potential concerns can be avoided by using best practices for soliciting and accepting crypto donations, doing your due diligence to create a transparent and safe giving experience, and keeping clear records of crypto transactions.

Why invest in accepting crypto donations?

Crypto represents a rapidly growing fundraising opportunity for nonprofits to receive large donations. And as interest in crypto continues to grow, diversify, and go more mainstream, it opens philanthropic possibilities to an even wider and younger donor pool.

Consider these specific reasons why crypto fundraising is a smart area of growth for nonprofit organizations.

Reason 1: Accepting appreciated assets like crypto fuels fundraising growth.

An analysis of one million nonprofit tax returns found that accepting non-cash gifts drives nonprofit fundraising growth regardless of nonprofit size and sector.

When looking at growth over a five-year period, nonprofits that strictly accept cash donations only grew by 11%. However, organizations accepting appreciated securities (like stock and real estate) grew by 66%.

Many crypto owners today (and now several big financial institutions) treat their holdings like appreciated assets, buying and holding or trading them as valuations fluctuate. If nonprofits can secure these gifts, it will tremendously impact their fundraising growth in the same way that other non-cash asset gifts like stock do.

Reason 2: Crypto gifts can help you get bigger gifts from the same donors.

Gifts of appreciated assets like stock and crypto tend to be larger than the average cash donation (even from the same donors). This is because donors often pass the tax savings onto your nonprofit. 

And by encouraging donors to give from their wealth (like crypto assets) rather than their disposable income (cash), you can unlock new major gifts from under-the-radar sources. That is, while you may not pick up major giving signals from a longtime donor, that may be because you’re not researching or asking the right questions about their non-cash holdings.

Reason 3: Accepting crypto can open up a new pool of donors.

Crypto is a new source of wealth for many crypto owners. With rapid appreciation, there is a new pool of people who hold a lot of wealth in crypto, but not as much in cash.

This growing segment might not have been a priority for nonprofit development teams in the past, but it should be now. 

As more people buy crypto, more will likely see gains and want to give some of that wealth to charity in a tax-savvy way. If nonprofits can provide an easy way to donate crypto, they can tap into this growing segment of wealthy, younger donors to build long-lasting relationships.

How to accept crypto donations for your nonprofit

As an emerging field, best practices and technology for cryptocurrency fundraising are constantly evolving. 

However, there are a few basic steps you can take to build the framework for a more intentional crypto giving program. These steps will help you lay out a reliable system for soliciting and accepting crypto donations:

1. Include crypto donation options on your website.

If you want to receive crypto donations, make sure your donors know about this option! The easiest way to cover your bases is to highlight crypto giving on your website.

There are three key places to include crypto on your website:

• Main donation page
• “Ways to Give” page
• A crypto-specific landing page

Most modern donation pages have dropdown options for donating via credit card, checking account, PayPal, and more. Allowing donors to select crypto on your donation page can streamline the process and encourage larger donations for your organization.

Another option is to add a line of text on your donation page letting donors know that crypto giving (and its tax benefits) is an option, then link to a crypto-specific donation page. We’ll explain how to easily create one of these crypto pages below.

Your “Ways to Give” page lists all the different ways donors can contribute to your organization. Including crypto among these options may be as simple as adding a bullet to a list. For example, you could write:

‍Donate crypto, save on taxes, make a difference. If you own crypto, donating to [NONPROFIT] is a smarter, tax-savvy way to make a difference. Learn more here [link to dedicated crypto giving page].

2. Ensure you're collecting the right donor information.

If you use an existing donation form, donor information fields will already exist. 

If you create a crypto-specific donation page, you need to capture donor information before providing the wallet info to make the gift.

Many crypto owners like the anonymity of crypto, but they may not realize this means their gift will come to you anonymously. Letting them know that you are requesting donor information so you can properly thank them for their gift and provide tax documentation will lower anonymity rates.

Here’s some sample language for explaining this data collection process:

Thank you for your crypto donation to [NONPROFIT]. Please use this form to make your gift. Your name, address, and phone number are optional, but they help us tremendously to understand who our donors are, allow us to express our gratitude, and ensure you receive the correct documents for tax purposes. We never share, sell, or trade donor information. Your donation does not trigger capital gains tax and may be tax-deductible.

3. Establish crypto donation liquidation policies.

Because crypto is a volatile asset, most nonprofits prefer to immediately sell crypto donations for cash. This is the least risky way to handle donations because it prevents accounting discrepancies between the amount donated and the amount actually received.

To liquidate crypto gifts, you can use a payment processor that automatically converts crypto into cash for you. You can also leverage a platform like FreeWill, which enables your nonprofit to easily accept crypto donations (with 0% liquidation fees!) and is specifically designed for nonprofits to grow their non-cash giving programs. 

Note that some organizations do choose to hold crypto for longer timeframes. However, these are usually larger nonprofits that have robust fundraising programs, a strong interest in promoting cryptocurrency, and the capacity to actively manage and invest these assets. For smaller nonprofits just getting started with crypto, this route is generally not recommended.

Either way, it’s best practice to include information on your website about how crypto will be accepted by establishing a concrete acceptance and liquidation policy. Here’s an example:

Cryptocurrency donations are processed by [COMPANY] and are immediately sold and transferred to [NONPROFIT NAME] in U.S. dollars. We do not maintain a reserve of cryptocurrency, therefore all crypto donations to [NONPROFIT NAME] are final.

For a closer look at crypto acceptance policies and what they should include, please refer to our in-depth guide:

4. Be aware of relevant tax laws for crypto fundraising.

Many nonprofits fail to comply with IRS regulations around accepting crypto gifts—and completely inadvertently!

While a crypto gift can sometimes feel no different than a gift of publicly traded stock, there are key differences in their tax reporting implications.

This is partly because of how the IRS defines “charitable deduction property.” This category generally includes crypto but not publicly traded securities. This difference, along with other factors, can trigger additional reporting responsibilities for both you and your crypto donor:

• If a nonprofit sells donated property (like crypto) within three years of donation, it must file Form 8282 with the IRS within 125 days of sale. The form must be signed by an officer at your organization, and the penalty for not filing is $50 per form. This is generally true for all donations over $500.
• If the gift is worth over $5,000, the nonprofit must also sign Form 8283 for the donor to be able to deduct it. While you don’t have to attest to the value of any donated property, you do have to acknowledge its receipt.

It’s possible (and likely) that IRS regulation around donating crypto could change, but the easiest and safest workaround is to use a reputable external partner to accept, process, and immediately liquidate crypto donations.  If you’re using FreeWill’s Crypto tool, we handle the liquidation and IRS compliance to minimize risk and simplify your work.

5. Educate your gift officers and marketing team about crypto donations.

It’s helpful for anyone speaking or marketing to donors on behalf of your organization to be familiar with all the ways to give. Gift officers and marketers should have a basic understanding of how crypto works and feel comfortable talking about it.

While they don’t need to know all the intricacies of how crypto is mined, they should know how interested donors can give crypto and the general tax benefits involved.

Marketing should also understand how to message crypto and target the right donors. For example, they should know to target segments of younger donors in major cities and those in tech professions.

Just keep in mind that your nonprofit should never give explicit financial or tax advice, just like when discussing planned giving or other non-cash donation options. Provide a general idea of the tax benefits that can be expected, but refer donors to their own tax and financial professionals for official advice.

6. Reach out to existing donors to promote crypto giving.

Not all of your donors will be interested in donating crypto, but many will be excited that you’re offering this new way to give. There are two approaches you can take when talking to your existing donors about crypto:

• Let all your donors know about this new way to give as a soft FYI.
• Identify people in your current audience who own crypto and directly solicit these gifts from them.

Follow your normal markeing best practices for a new giving program. While you may not want to email your full donor list with the subject line “Donate crypto today!”, it can be helpful to include a mention in an existing campaign explaining that crypto is another way to give. For example, you could add a postscript to an email or include a paragraph highlighting the new addition of crypto donations.

For the direct outreach method, send a general survey to simply ask about it, similar to how you might ask donors if they have a DAF account for the first time. You can also research common demographics of crypto owners (learn more below) and conduct a prospect screening to identify any confirmed or likely prospects.

‍Once you identify people in your current donor pool who already own crypto, you can then immediately implement targeted emails to promote gifts of crypto.

‍But if you can’t yet identify them, no worries—first try the soft FYIs. In your database, tag the people who click on crypto links or respond with inquiries about crypto donations. These insights plus survey responses will allow you to build up your data foundation for the giving program.

7. Develop an acquisition plan for new crypto donors.

If you’ve reached out to your current donors about crypto and have heard crickets, don’t despair. One of the exciting opportunities with crypto donations is the prospect of tapping into a new donor audience.

You likely already have a plan for acquiring new donors generally, but there are a few extra things to keep in mind when reaching out to crypto owners:

• They are online. Crypto owners are tech-savvy, so you’ll find them in online spaces. Email, social networks, and other virtual spaces (e.g. Reddit and Twitter) are where your outreach will be most effective.
• Don’t call them, and skip direct mail. This younger demographic is far less likely to pick up a phone to talk if you call. You can also skip sending them mail.
• Send texts. Reaching out or following up with donors via text message is an effective tactic for people who don’t go anywhere without their phones.
• Target based on interests and demographics. When targeting your outreach, there is a lot of solid demographic information for you to work with. Targeting by age group, location, and interest areas related to your mission will yield the best results.

Pro Tip: As your program takes off, remember to pay attention to stock giving, as well. With the rise of crypto-based ETFs, these two forms of giving are becoming increasingly intertwined. A donor who’s given you stock in the past may now find themselves in the world of crypto, and vice-versa. 

Next, let’s take a closer look at some of the key context you’ll need to sustain your crypto giving program: donor motivations and demographics.

Why do donors give crypto to charity?

Why would a donor prefer to give you crypto over cash?

Many crypto investors have seen significant appreciation in the values of their crypto assets. And as the regulatory landscape matures, many are encountering capital gains taxes for the first time—and realizing the potential benefits of donating their crypto to charity instead of selling it.

Like property or stocks in the U.S., cryptocurrencies are subject to federal capital gains taxes, which are taxed when an individual sells the asset. The crypto tax rate for federal taxes is the same as the capital gains tax rate. 

• For long-term capital gains (holding the coin for 365+ days), taxes range from 0-20% depending on income. 
• For short-term capital gains (holding the coin for 365 days or less), capital gains are taxed at income tax rates of 10-37%

When donors give crypto directly to charity, they avoid capital gains taxes. They may also receive a federal income tax deduction for the full value of the gift.

In other words, it costs your donor less to make a gift of cryptocurrency than it would to sell their crypto and give the proceeds in cash. Many donors choose to pass these savings on to the nonprofit, translating into much larger gifts for your organization.

Let’s walk through this example. A donor purchased a crypto holding for $5,000 and has owned it for more than a year. The holding is now worth $33,000.

• Option 1: The donor sells the crypto holding and pays a 20% capital gains tax on the proceeds, which would total $5,600. They would then donate the post-tax cash to the nonprofit (and claim a tax deduction for the same amount), $27,400.
• Option 2: The donor gives the crypto to a nonprofit directly, pays $0 in capital gains taxes, and the full $33,000 goes to the charity. The donor could then potentially claim a federal income tax deduction of $33,000.

For donors, the more appealing option is clear, but since crypto (and the idea of donating it to nonprofits) is relatively new, the choice might not be readily apparent. It’s your organization’s job to explain this process and the potential benefits that you both could experience from the direct donation process.

Who donates crypto to nonprofits?

More people are investing in crypto than ever before. In 2023, Pew Research found that 17% of American adults have invested in, traded, or used crypto at some point. And the Motley Fool found that another 43% said they’d be likely to buy it within the next year, largely thanks to its increased accessibility through traditional financial services firms and investment providers.

As the adoption of crypto has risen, so have donations via crypto. Crypto donations going into Fidelity Charity donor-advised funds reached $38 million in 2022. 

So, who uses and donates crypto? For the most part, it’s the philanthropic younger generations. The same Pew Research study found that:

• 41% of men (ages 18 to 29) say they have invested in, traded, or used cryptocurrency, compared with just 16% of women in the same age cohort.
• Looking at all age ranges, men are much more likely to own or invest in crypto (25%) than women (10%).
• Non-White respondents were more likely overall to report owning or investing in crypto than White respondents.
• Upper incomes are better predictors of crypto ownership (22%) than middle (19%) and lower-range incomes (13%). 

Key takeaway: Accepting crypto donations and promoting this giving option can create valuable new opportunities to connect with diverse, new audiences.

Historically, younger donors have not been a large donor segment for most nonprofits. Other organizations may struggle to retain young male donors or racially diverse segments of donors.

However, crypto has created a new source of wealth for these demographics, and crypto donations from them have soared. By connecting with these donors now, you can educate them about the significant tax benefits of donating crypto to charity, secure new gifts, and begin stewarding lifelong philanthropic relationships.

What you’ll need to start accepting crypto donations

To begin your crypto fundraising program, you’ll need these essentials:

• A tool to accept and process crypto donations, like FreeWill’s Smart Giving Suite.
• Educational materials for your team. Your finance, fundraising, and marketing teams will all need to understand their roles in the crypto fundraising process and be able to comfortably speak about crypto with donors.
• Marketing and acquisition plans. Study up on the demographic data above. Build a plan to identify and target potential crypto donors similarly to how you might conduct outreach to other major or planned gift donors.
• Policies and guidelines. Crypto acceptance policies that detail how gifts will be processed and when they’ll be liquidated are a must. Explore our full acceptance policy guide for more information and templates.
• Communication templates. Hit the ground running by creating templates for promoting crypto fundraising. You’ll need templates and design collateral for social media posts, text messages, and emails that briefly explain the value of donating crypto and encourage readers to learn more.

Cryptocurrency donations are an exciting and growing field for nonprofits. Although it can be easy to get caught up in the technical jargon if this is a new form of giving for your nonprofit, the bottom line is that crypto represents a powerful way for new audience segments to give large, tax-savvy, non-cash gifts.

Getting up to speed on crypto fundraising now will help your organization stay ahead of the curve and build strong connections with new groups of donors.

To learn more about crypto fundraising and other valuable forms of non-cash giving, keep exploring with these additional resources from the FreeWill team:

• Accepting crypto donations: 6 updates to your gift acceptance policy
• How to accept stock donations: What nonprofits need to know
• Sample donor cultivation plan: 3 tiers for engaging nonprofit donors
• Millennial donors: Your guide to major gifts & Millennial giving