What is Cryptocurrency, and why are SEED interested?
SEED first joined the world of cryptocurrency several years ago, but with only limited understanding of what digital currencies could do for charity, and our limited capacity to explore cryptocurrencies as a form of donations, it got a little left behind.
However, in 2021 we want to revitalise cryptocurrency as a way of boosting our resources. The pandemic saw our financial reserves hit hard whilst the urgency of our work increased. Like any small charity, we rely on regular donations to keep our work ticking over and with income from Trusts and Foundations as well as the FCDO becoming less certain, we are looking to cryptocurrency to expand our reserves.
Cryptocurrency is a currency that exists entirely in the digital sphere and SEED has set up dedicated crypto currency “wallets” in order to accept donations in this way. In this blog, we want to share a little more about what cryptocurrency really is, why we’ve decided to accept it, and how it can benefit charitable organisations like ours.
What is cryptocurrency?
Cryptocurrency is essentially a digital-only currency that can be used just like money in exchange for goods or services. It does not exist in a physical form and does not pass through any kind of banking corporation or system. This is defined as a “decentralised” system which is run on a technology called Blockchain; Blockchain works on a network of computers that manage and record each transaction, this technology means that the system is neutral and extremely secure.
There are now over 6,000 individual cryptocurrencies but the largest and longest standing “coins” include Bitcoin, Ethereum, Litecoin and Bitcoin Cash. More recently new alternative coins like Dogecoin, Polkadot and Cosmos have gained in popularity.
Why do people have cryptocurrency?
One of the biggest draws for many people holding cryptocurrency is the potential for its value to increase. As recently seen with Bitcoin, the purchase price of which was £66.40 per coin when it began in 2013, is now worth £37,170 per coin*. For the early adopters of Bitcoin who possibly purchased multiple coins at the time, there’s now huge value in the coins they still have.
Some supporters on the other hand, like the idea of removing central banks from managing a money supply, particularly as over time banks reduce the value of money through inflation. These supporters buy into cryptocurrency to increase the demand, innovation and adoption of this type of currency to encourage its future use.
Other supporters use the safe, low-cost transactional methods of cryptocurrency to manage money transfers. For example, a person may be working in the UK but sending some of their earnings to family members in a different country every month. Doing this via the banking system can take several days and pass through many organisations that each charge a fee for both processing and currency exchange. With crypto, there are still fees, but this is usually a one-off fee at a much lower rate and the transfer through the Blockchain network is almost instantaneous.
Why do people donate cryptocurrency?
Global cryptocurrency is currently worth around $200 billion, and with the dramatic value increase of Bitcoin - which holds around 65% of that $200bn - you can see how many individuals now have, what is essentially, “free money”. Many of us say that if we won the lottery, at least one of the things we’d spend the money on would be some kind of charitable initiative, whether it’s helping the homeless or building an orphanage for elephants. With free money comes goodwill, and this gives charities a chance to benefit. Humans are innately generous beings and when those of us who come into good fortune, we often like to share it with those who are less fortunate.
With a great increase in free money, also comes tax. Like with normal financial assets, cryptocurrency is considered taxable by the government and you must declare it; although also like earnings, there are caps on how much is taxed. If a person holding cryptocurrency suddenly sees a boost in the market value, they may want to donate funds to allow charities to benefit instead of paying tax to the government. Each country’s government will have guidance on how to go about this and what assets will be liable for tax on their website. Cryptocurrency being subject to taxes means that donating to charity becomes an option that’s mutually beneficial for donor and receiving organisations.
How can cryptocurrency be donated to us?
Cryptocurrency can be donated directly to SEED’s cryptocurrency wallet on Coinbase. We are currently accepting donations of Bitcoin, Bitcoin Cash, Ethereum, Litecoin, USD Coin and Dai. Upon receiving the donation, it is exchanged into GBP so that we are not hedging any donated funds.
How does accepting cryptocurrency benefit charities?
According to the Global NGO Technology Report (2019), today cryptocurrency donations represent 1-5% of the used payment method for charitable donations, with a +100% growth in some countries.
By accepting crypto-donations, we are reaching a potential hundred million new donors that may not donate through traditional methods; it also enables us to open up to greater income opportunities simply by accepting more types of funds.
Presently the number of charities accepting crypto is relatively small. We want to be at the forefront of charitable benefit of the growth of cryptocurrency in order to maximise our project potential. By raising funds, as well as awareness, for the needs of communities in Madagascar we are able to move closer to achieving our vision.
The rising adoption of cryptocurrency will only result in more charitable donations. With regards to the wider adoption of crypto, companies such as Tesla, BNY Mellon and Mastercard are all now publicly interested in Bitcoin which will continue to place higher value on this decentralised currency. With increasing interest and business exploration of cryptocurrency, there is great potential for this donation stream to become more important for charity. At SEED, our intention is always to optimise our funding to deliver the greatest possible impacts in Madagascar and we hope that with a more diverse donor base and increase in funds from this area we will be able to continue our work into the future.
If you have any questions about our foray into cryptocurrency donations, please get in touch with me, I’d love to talk more about it!
*Bitcoin price recorded at time of writing: 15:30 GMT on 18/02/2021.
Please note that the information provided in this blog is not considered financial advice and we encourage you to carry out research based on your individual circumstances before engaging in cryptocurrency donations.