Last year was big for us. In 2017, thanks to the generosity of donors, Charitable Impact processed over $127 million charitable donations. Which brings to the total amount processed by Charitable Impact, to date, to more than $300 million.
That wasn’t the only milestone for us, though. In 2017, Charitable Impact accepted the first known cryptocurrency donations ever publicly made through a Canadian donor-advised fund (DAF).
In total, we processed over $2.5 million Canadian dollars worth of cryptocurrency through our cryptocurrency donations service.
Before we get started, a definition of terms:
The DAF is the financial structure that lets Charitable Impact users put their assets into an account, receive an immediate tax receipt, and then decide which charities to send them to later.
And “cryptocurrency” is a term encompassing Bitcoin, Ethereum, Ripple, and other decentralized digital currencies that run on blockchain technology. Bitcoin, in particular, has been in the news lately.
(To learn more about bitcoin and its recent meteoric rise, you can check out this article from CBC. And for more information on what cryptocurrency is, and how it works, Blockgeeks offers a comprehensive breakdown.)
This an important milestone because the DAF structure offers unique benefits to donors, compared to making donations to public foundations or directly to charities. And, by processing cryptocurrency, Charitable Impact is keeping up with trends in financial technology (fintech) that will reshape how people make, move, and save money in the future.
Christian Mosley, Director of Client Success, helped to develop the process through which Charitable Impact accepts cryptocurrency donations. When a donor contacts Charitable Impact with the goal of donating cryptocurrency, Mosley is the person they talk to.
“My first aim is to take some time to get to know the donor and their giving objectives,” says Mosley. “It’s not just a transaction between Charitable Impact and the donor. It’s the beginning of a relationship.”
To work with a client, Mosley first needs to learn how they would like to use their cryptocurrency—whether it will be sent all at once to one or more charities, or stored in their DAF and distributed gradually.
In either case, Mosley—with support from Charitable Impact’s in-house philanthropic advisors—is on hand to provide cause-neutral, strategic giving advice.
Once Mosley has spent some time learning more about the client’s needs, he calls on Clayton Correia, Senior Manager of Product, for support carrying out the deposit.
“First, we go through security steps to make sure that none of our tools, or the donor’s, have been compromised in terms of security,” says Correia. “This includes a number of test transactions, plus offline verification steps. It’s how we make sure there’s no danger the client will accidentally lose cryptocurrency during the transfer.”
After that, it’s a matter of the client transferring the funds to Charitable Impact’s wallet. This “cold” cryptocurrency wallet—one whose private access information is stored offline, on a hardware platform that can’t be accessed via the internet—is the surest means of protecting stored currency from potential hackers.
That money gets added to the client’s Impact Account, and the client gets a charity tax receipt for the value of their donated cryptocurrency. Then, the cryptocurrency is liquidated—converted to the Canadian dollar—through a Canadian cryptocurrency exchange.
When the money is in their account, the client can choose which Canadian charity or charities it goes to.
Building the Future
While this marks the first time cryptocurrency has been moved through a DAF in Canada, it isn’t the first time cryptocurrency has been donated to charity.
In total, American donors gave $22 million in bitcoin to charity in 2017. (That doesn’t include other cryptocurrencies, like ether.)
It’s clear that the world of cryptocurrency is intersecting with the world of charity, introducing new challenges and opportunities. As a store of value, cryptocurrency is both a means of making investments and carrying out transactions.
On the investment front, currency speculation has lead to volatile markets. Bitcoin, the media darling, rose 800% in value in 2017. And it didn’t even see the biggest change, compared to other, lesser-known currencies. Ether rose 2000% in 2017.
So long as cryptocurrency markets are volatile, some investors will be cashing out — selling their crypto for “traditional” currency—and seeing big influxes of capital.
But money made from cryptocurrency is like any other income: taxable. At least since 2013, the Canadian Revenue Agency has recognized cryptocurrency as a good, and not a currency. That means, when you sell crypto for Canadian dollars and make a profit, you’re taxed on it. And the greater your profit, the bigger your tax obligation.
Donating to charity is a smart way to reduce your tax obligation, while doing good in the world. Just as investors in the stock market may work with financial advisors to plan their charitable giving, we can expect that investors in cryptocurrency will do the same.
As a means of exchange, cryptocurrency already has wide applications. You can even order pizza with bitcoin. But the value of cryptocurrencies is still unstable—bitcoin has crashed in the past—and that prevents them from being used by most people on a regular basis.
Once they stabilize, it’s likely cryptocurrency will be more popular for day-to-day applications. One of those applications will be charity.
A DAF: The Best Way to Donate Cryptocurrency
The DAF financial model that Charitable Impact uses is the best possible way for people to donate cryptocurrency to charity in Canada.
When a donor gives cryptocurrency through Charitable Impact, the current market value of the currency goes into their Impact Account. They immediately receive a tax receipt for 100% of that market value. It’s up to them to decide, later, which charity gets the money.
Very few charities currently accept cryptocurrency donations. The process of establishing cryptocurrency wallets (complete with security measures), accepting and recording transfers, and liquidating funds is a complex one.
So, to donate to most charities, a donor first has to convert their cryptocurrency to cash, and donate the cash.
Perhaps the most inconvenient part of the exchange process is triggering taxes. As soon as you “sell” your cryptocurrency for Canadian dollars, you’re obligated to pay taxes on the money you receive. Depending on your income bracket, that could be as high as 30% of the cash value.
Donating through a DAF like Charitable Impact’s puts 100% of the cryptocurrency’s value in charity’s pocket, reports 100% of that value with a tax receipt, and lets you choose which charity gets the money once you’re ready to make a decision.
We hope investors and cryptocurrency enthusiasts who’d like to support charity with their earnings do so through Charitable Impact.
Our platform gives donors a fast, flexible, anonymous, tech-driven way to give to charity. Most people who invest significantly in cryptocurrency don’t do so lightly. It takes research and analysis to choose when to buy, when to sell, and which currencies to wager on.
Ideally, people who want to support charity should put as much effort into choosing the charity they want to support. We work to support that kind of thoughtful engagement with charity by giving donors the ability to hold money in a DAF until they’ve decided where they want it to go.
The Royal Bank of Canada recently predicted that the cryptocurrency market will reach a total volume of $10 trillion in fifteen years.
We’re ready to help put some of that money in the hands of charity.
Do you invest in cryptocurrency, and want to support charity? Or are you considering investing in cryptocurrency, and wondering how you can use it to support causes you care about while balancing your portfolio? Get in touch.