There are many ways to put your crypto to good use. Giving it to someone else in need is one of them. Why is it worth considering and how to do it best? Read our guide to learn.
Key Takeaways
- Although there is no straightforward economic incentive to make charitable contributions, people still use their money to support different causes. At a certain level, it becomes philanthropic planning, a wealth management strategy that aims to make large contributions effective.
- In addition to moral satisfaction and an improvement to a cause, donations are tax deductible, even if made in crypto. Moreover, cryptocurrency donations let you support organizations that can’t raise funds due to censorship in their jurisdiction.
- Many large and small charitable organizations choose to accept contributions in crypto assets. Almost any cause you can think of can be supported with a cryptocurrency donation.
Charitable Giving and Crypto Wealth Management
Scientific research and collective life experience alike suggest that humans have a tendency to help their kin or close ones. This help has taken on many forms as our history progressed but the fact remained largely the same. As the economy progressed, monetary contributions such as charitable giving became nearly as valuable as offering aid in the form of labor or personal participation. Culture and religion also played a part in reinforcing the importance of helping fellow man.
In other words, it is quite natural to give a thought to charitable contributions once your needs are met. For the regular folk, it rarely goes beyond the amounts they can afford to share, and the feeling of satisfaction from helping someone is often more than enough in reward.
It is a different story with high net-worth individuals and entities, though. When you have so much to spare that a contribution can make a tangible difference, the scope of charitable giving goes beyond what ordinary people are used to. It becomes what is known as philanthropic planning, a strategic approach to helping. Simple joy also obviously becomes too small a reward, and donors incorporate philanthropy into their wealth management to establish a legacy or support multiple charities and causes.
Brief On Effective Altruism
In crypto circles and even mainstream, the philosophy of effective altruism (EA) was popularized by Sam Bankman-Fried, the CEO of Alameda Research and FTX. Although he attracted a lot of scrutiny to the movement after the crypto exchange imploded due to ironically ineffective handling of funds, EA traces back to at least 2011.
There is somewhat of an overlap in applying a strategic approach to charitable giving and ascribing to the ideals of EA. It relies on several principles such as impartiality, cause prioritization, and cost-effectiveness. Simply speaking, EA motivates donors to use their funds to do the most good, regardless of the beneficiary, and be cost-effective about it, making as much positive change with their buck as possible.
Anthropologists and psychologists have found EA to be counterintuitive, putting it mildly. After all, the first instinct for a person looking to donate to charity would be to choose a cause they personally resonate with and give higher priority to their own community or ingroup. Nevertheless, although this movement has been criticized for utilitarianism and reducing positive impact to numbers, it is popular in crypto circles and can give a fresh perspective into planning your philanthropic goals.
Benefits of Donating Cryptocurrency
EA proponents suggest focusing less on ‘what to do’ and more on ‘why’ and ‘how’. Besides, if you are reading this article, you already have an idea for the former: donating cryptocurrency. Let’s continue by focusing more on the whys and hows.
Of course, personal benefit is not the first consideration when doing philanthropic planning. Nevertheless, there are a few benefits to choosing to donate Bitcoin or other cryptocurrencies. You get to save on capital gains taxes and can support nonprofit organizations under legal pressure and censorship.
Tax Benefits
Donating appreciated securities might be a more economical choice because you would not need to pay capital gains tax as when you cash it out first. It is the same with crypto. By transferring it directly to charitable organizations, you make a donation that is much closer to its fair market value than a cash donation funded by your crypto assets.
Moreover, donations in cryptocurrency can also be eligible for a tax deduction at the fair market value. Each case is different, though, so consult with a tax advisor to know for sure if you are eligible.
Privacy
Crypto fundraisers also often become a lifeline for nonprofit organizations fighting for individual freedoms that cannot raise funds legally in their jurisdiction. They include independent local media, legal aid for dissenters, minority rights activists, and more.
Before you commit to charitable giving to a recipient under censorship, make sure it is safe for both parties in terms of legal repercussions. Consider using privacy-preserving networks like Monero (XMR).
Which Charities Accept Donations in Crypto?
Now that we have ironed out the ‘what to do’, let’s see which nonprofits will accept the charitable gift of digital currency.
Children and Youth
The younger generation is not often removed from the average person’s circle of moral obligation to help but it does not mean that this cause is fully provided for. EA also underscores our obligation to help not only those sharing the world with us in the present but also the future generations.
Hardly anyone can argue that the well-being we were provided or denied in our younger years influenced our lives as a whole. Therefore, donating cryptocurrency to initiatives aimed at bettering the lives of young people is universally considered a worthy cause. Some public charities working in this direction and accepting cryptocurrency donations are ICNA Relief, No Kid Hungry, and SOS Children’s Villages.
Health and Medicine
Medical and treatment research is also an obvious pick for your donation to make an impact. Even outside of quantifiable EA considerations or idealistic extropian aspirations, funding medical research and treatment tangibly improves lives.
To support this cause, review charities like Children’s Medical Research Institute, EcoHealth Alliance, and Cure Rare Disease.
Environment and Animal Welfare
Charities that focus on helping animals alongside humans are very common, ranging from local shelters to global initiatives to protect our shared home. This outlet for financial support is also very popular in EA circles, which highly value the long-term impact of alleviating climate change. Reducing animal suffering also brings us closer to food justice and a more humane society.
To support this cause, you can help The Humane Society of the United States, Rainforest Rescue, and VegFund.
Human Rights
Target initiatives with a clear-cut goal are usually perceived as more effective since there is a clearer path from charitable giving to a positive effect. However, this approach and the EA movement in particular have been criticized for ignoring systemic causes of the problems they are trying to solve.
Supporting free speech and human rights advocates may not have an observable goal in the near future but it has the effect of creating or strengthening the foundation of a just and democratic society. At the forefront of this cause are juggernauts like Amnesty International and Reporters Without Borders, as well as more localized initiatives such as Free The Girls and The Victor Pineda Foundation.
Conclusion
With charitable giving, you get to make the world a better place, regardless of whether you donate cryptocurrency or other assets. Although, we can admit that the tax benefits are nice to have, too!
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Frequently Asked Questions
What is philanthropic financial planning?
Philanthropic planning is a wealth management strategy that involves devising a statement of purpose and establishing a vehicle to support charitable organizations. The benefits of making donations strategically range from tax advantages to more abstract upsides such as establishing a legacy and involving the next generation.
Can you donate crypto to charity?
Yes, some nonprofits and private foundations accept donations in cryptocurrencies. You can find a list of them and even donate right away on platforms like The Giving Block and Daffy.
Can you write off crypto donations?
Yes, donating crypto can enable you to receive a tax deduction, although you might need to consult with a tax advisor. Moreover, as with any appreciated asset, by donating cryptocurrency directly you can save on the capital gains tax and contribute a sum closer to the fair market value of the assets.
Disclaimer
This article is not a piece of financial advice. When dealing with cryptocurrencies, remember that they are extremely volatile and thus, a high-risk investment.
Always make sure to stay informed and be aware of those risks. Consider investing in cryptocurrencies only after careful consideration and analysis and at your own risk.
