There's an old saying in the nonprofit world, namely, "no margin, no mission." It speaks to the importance of having adequate funding for solving critical problems and achieving purposeful aims.
As an alternative to legacy banking and payment systems that have been in place for eons, the digital currency Bitcoin is rapidly emerging as an effective way to capture new funding. It's rapid ascent as a option for charitable contributions is being fueled by a growing shift towards online giving and micro transactions. It's in this sense that Bitcoin doubles as both an alternative currency as well as a more efficient system of payment.
Generating trust in the non profit world around this funding option has been slow in its development as negative stories about scandals and arrests in the bitcoin world were big media news. With much of this chatter having dissipated over the past 18 months amid Bitcoin's rapid maturity, many non profits are now examining its efficacy as a secure way to facilitate financial transactions without the involvement of banks and other financial institutions. All of this represents a new recognition on the part of nonprofit leaders on how to capitalize on emerging forms of technology to sustainably leverage the dollars they raise for the fulfilment of their mission.
Having worked at four nonprofit health care organizations during my professional career, I am intrigued by the massive potential of bitcoin in terms of the speed and efficiency in which it can drive money to a compelling cause. In my opinion bitcoin will ultimately have a transformative effect on how charitable donations are captured, accounted for and utilized in the days ahead.
Facilitating The Flow of Contributions
There are two primary ways these donor to nonprofit contributions can be facilitated through the use of bitcoin. The first and perhaps easiest way for this occur is through an online platform such as Coinbase where monies are transmitted by way of a electronic bitcoin address into a repository affectionately known as a wallet. Once captured, these funds can be immediately exchanged by the non profit into cash for a safe and secure deposit into a bank account.
The second way is through a third-party Bitcoin campaign intermediary. An example of this is Bitgive, which has the distinction of being the first ever 501(c)(3) nonprofit charitable foundation for the Bitcoin community. Their mission: To leverage the power of bitcoin in improving public health and environments worldwide through fundraising campaigns, education and partnerships.
At the forefront of facilitating global awareness of the interestion between bitcoins and nonprofits is the Bitcoin Foundation of Canada in conjunction with the Bitcoin Embassy, the latter being the first physical space in the world dedicated to blockchain technology and cryptocurrency. Through their collaborative efforts they established a campaign called GiveBTC, which promote the use of Bitcoin for charitable purposes.
One of the valuable resources that has been developed by the foundation is a Bitcoin Handbook for Non Profit organizations, a practical guide to assist nonprofits in getting up to speed on how to integrate Bitcoin into their fund raising efforts. It also serves as a helpful guide for bitcoin enthusiasts seeking to convince their admired charities to accept bitcoin donations.
Adoption of bitcoin by the nonprofit community took a huge step forward in September of 2014 when United Way, the world's largest privately funded non-profit organization, announced that it would begin accepting bitcoin contributions through Coinbase. Speed and efficiency in facilitating transactions aside, United Way recognizes that Bitcoin aligns with its mission of improving education, helping people achieve financial stability, and promoting better health. Contributions will be directed toward United Way's Innovation Fund which endeavors to transform the social sector through projects targeting technology, relationships, and efficiencies that fuel the organization's chapters nationally.
In recoginizing bitcoin's value as both a technology and currency, numerous other nonprofits have also jumped into the fray, including the American Red Cross, Khan Academy, Save The Children, The Water Project and Wikipedia. Here, these and other non profits are discovering is that getting a Bitcoin campaign up and running is a piece of cake. It involves creating an online account with a bitcoin platform that allows you to establish a digital wallet. Contributions from a donor can be easily facilitated through a donation page which includes a description of the cause along with a bitcoin address or QR code that allows for receipt of money into the wallet.
Building Bitcoin's Benefits Into The Nonprofit Ecosystem
At a broader level, the beauty of the Bitcoin network is that it offers a number of benefits that can greatly enhance the effectiveness of a fund raising campaign. These include:
Global Reach: As a digital, decentralized currency, bitcoins can be donated from virtually anywhere in the world via an internet connection and a smart device or computer. National borders and physical distances become completely irrelevant which allows people globally to come together to assist others in need ( i.e. think disaster relief).
Ease of Payment: Bitcoin payments are quick and efficient while offering a ledger of payment transactions through what is known as a blockchain. Moreover, it allows donors to send smaller amounts, including micro donations of $1 or less, without burdensome transaction fees. And yes, bitcoins can be converted to nation specific currencies without risk.
Security: Donors, particularly when making online contributions, want to know that the transactions they're making are safe. It's here where bitcoin offers a decided advantage over eChecks and credit cards with its state-of-the art encryption as well as no central database or identifying information to be hacked.
Anonymity: Some non profit contributors, particularly those of the high profile variety, want to ensure that their contributions remain anonymous for a host of reasons. Bitcoin offers this in spades, an important feature given one of the big components of charitable giving, which is trust.
Tax Deductibility: Last year the IRS issued a ruling on the taxation of digital currencies, stating that they should be treated as property, not currency. While this may represent an adminstrative nightmare for some non profits, it also allows donors the opportunity for a generous charitable income tax deduction for donating Bitcoin that is worth more than they paid for it---just as in the case of giving appreciated stock to a charity. Bottom Line--Organizations that accept non anonymous donations may be able to offer tax-deductible benefits for bitcoin donations with the deductibility level predicated on the the bitcoin price trajectory for that tax year.
In closing, I believe that Bitcoin is well poised to make a significant contribution to the world of charity fund raising. With it's ability to transcend global barriers as well as the speed and efficiency in which it can gather and distribute money, look for this means of transacting money to play an important role in forming a new normal in the world of non-profits.
Michael Scott is a Journalist and Blogger located in Denver. He can be found on Twitter @biz_michael