June 12, 2017; Bitcoin Magazine
As recently as yesterday and as long ago as at least 2014, NPQ reported (and here and here in 2014) on the adoption of decentralized cryptocurrencies and digital payment systems such as Bitcoin by the nonprofit sector.
The best known of the cryptocurrencies, Bitcoin, is making deeper inroads into respectable society, including the nonprofit sector. On [July 30, 2014], the Wikimedia Foundation, the entity behind Wikipedia, said that it would add the digital currency to its extensive list of payment methods.
With more than 7 million views, this brief video is a reliable primer on how Bitcoin works. Kayla Matthews, a technology journalist and blogger, writing an op-ed for Bitcoin Magazine, explains how these peer-to-peer systems utilizing blockchain technology continue to make inroads into respectable society, especially nonprofits. Williams alerts us to the recent findings of the Global Cryptocurrency Benchmarking Study produced by the Cambridge Centre for Alternative Finance.
This study, which analyzed data gathered from 75 percent of the industry involving more than 100 companies in 38 countries, shows that the current number of unique users of “cryptocurrency wallets” is estimated to be between 2.9 million and 5.8 million. Williams says this new finding differs significantly from previous estimates of only approximately 1 million users.
Increased acceptance in the business market is also a positive sign for nonprofits, as it gives them more precedence to accept Bitcoin donations. Although this was still in its early adoption phase back in 2014, many nonprofits are now seeing Bitcoin’s advantages over cash, besides providing an additional revenue stream.
Williams highlights the benefits of using Bitcoin for nonprofits. As noted in the video, with banks and credit card companies out of the way, the processing fees are much lower for credit card transactions. Some vendors provide conversions to cash for nonprofits at no cost, which especially simplifies transnational donations.
Because (at least for now) the IRS classifies virtual currency as property, for donor acknowledgment purposes, nonprofits need to classify Bitcoin donations as noncash gifts, not assigning them value. The donor is responsible for acknowledging and documenting the value of each donation. The Financial Accounting Standards Board has yet to offer guidance on the classification of Bitcoin for financial reporting purposes. How an organization treats their Bitcoins (hold or convert them) will have audit implications, starting with the difficulty of verifying the valuation and even existence of the Bitcoin. Before accepting virtual currencies, a nonprofit planning to transact with donors in this way would do well to consult its accountant or attorney regarding how to properly process these donations as well as how to prepare donor receipts.
And Bitcoin is merely the most popular of the cryptocurrencies. There are also Linden Dollars for the virtual Second Life economy, Litecoin, Peercoin, Freicoin, and Ripple cryptocurrencies. Williams notes her concern over privacy issues as the use cryptocurrency systems continue to grow. And grow they will. Purse.io, for example, is a new app available for iOS and Android smartphones that enables potentially more than 2.3 billion people to shop on Amazon.com without having a bank account or even a computer.
Watch the video and read all the articles and references noted above, and like most of us, you may still not understand what all of this is about. Like fundraising, you truly understand something like this only by doing it. Cryptocurrency is also a bit like the promise of virtual reality for nonprofit marketing: We know it is here, we know some nonprofits are experimenting with it, but we are thinking there is still plenty of time before my nonprofit needs to pay any serious attention to it. That is probably true, unless you have a donor who is an early adopter who wants to make a six-figure Bitcoin donation—today. Then, it’s time to become an expert.
Here is a list of some of the organizations presently accepting Bitcoins. It may be time for an enterprising consulting firm to include this expertise among their offerings to nonprofits. There are platforms such as Bitpay (apparently the leader in this space), Coinbase, Coingate, and GoCoin that provide the wherewithal to accept these blockchain currencies as easy as installing any other plugin on your website. Here is a tech-oriented article comparing these various vendors.
It may occur to you that if it’s that simple to launch, why not be the first in your community or nonprofit sector to grandly announce with a big Bitcoin logo on your website that Bitcoin is accepted? If you take anything away from this article, take this: Check with your accountant and/or legal counsel first—and perhaps you had better keep an eye on the markets.—James Schaffer