Cryptocurrency donations have increased considerably along with the Bitcoin price (and those of Ethereum as well as other major altcoins).
Last year, Fidelity Charitable investors reportedly donated over $330 million in digital currency, which is over 12x the amount provided back in 2020, according to a report.
Last year, Bitcoin (BTC) saw its price surge to an all-time high of around $69,000 (the flagship crypto is currently trading at about $40,000). Notably, BTC accounted for around 80% of crypto donations to Fidelity Charitable. People also made donations in Ethereum (11%) and Litecoin (1%). A non-profit entity operating independently of Fidelity Investments, Fidelity Charitable handed out about $10.3 billion in 2021.
As explained by Money.com, there are various ways to give crypto to your preferred charities. One way is to work cooperatively with an organization such as Fidelity Charitable, which administers donor-advised funds.
You would be required to set up a Giving Account via Fidelity Charitable online with no minimum investment needed. After completing this step, you may transfer the BTC or other digital currency from your cryptocurrency wallet to a Fidelity Charitable account. The virtual currency you donate to Fidelity Charitable gets converted into cash.
You may then proceed to choose when Fidelity Charitable will send out the funds to a non-profit entity of your choice. And if you do not want to donate immediately, then you may invest the funds in a number of securities. This may include ESG funds, mutual funds that own stocks of firms with notable track records on environmental and social factors. Earnings are able to increase tax-free in your account until the time that they get donated.
Another way to donate virtual currency is to work with firms such as The Giving Block. This entity assists nonprofits with taking crypto donations. It also connects virtual currency donors to various charities.
The Giving Block has noted in a report that it took in $70 million worth of donations last year, which represents a 1,558% increase from 2020. Notably, NFT-related initiatives handed out $12.3 million to charities through The Giving Block.
It’s worth noting that donating crypto-assets to charity may save you when you are filing your tax returns. Whenever you sell an asset like a stock or cryptocurrency for over the amount that you had paid for it, then you may be required to pay a sizable capital gains tax on the difference.
The rate may vary anywhere between 0% to 37%, and it all depends on your income level and how long you’ve been holding on that particular investment.
Organizations such as Fidelity Charitable and The Giving Block are able to convert your crypto donations into cash (or fiat currency) quickly and then send the funds out to charitable organizations.
Fidelity Charitable takes only Bitcoin, Ethereum and Litecoin. Meanwhile, The Giving Block also takes those three cryptos, along with Dogecoin and any other virtual currency being supported by the Gemini trading platform.