Cryptocurrency:Are You Keeping Up?

Cryptocurrency has been in the news recently for a couple of reasons, and we thought it might be helpful to share our perspective on this interesting asset for charitable giving purposes.

The volatility of Bitcoin, the most well-known of the public cryptocurrencies, has led the press coverage over the past few years. Since Jan 2017, the Bitcoin has increased tenfold. The markets for crypto had their ultra-peaks in Dec 17 and Jan 18, were generally depressed through the latter half of 2018, further lost ground in the first quarter of 2019, and have recently been on the rise at a rate outpacing the markets in general, and Bitcoin has increased in value by 20% in the just the past five days. Notwithstanding the highly publicized highs, Bitcoin remains an appreciated asset for long term holders.

Through this period, we’ve seen the negative press on the risk of a large charity’s portfolio overinvested in cryptocurrency, interest (curiosity?) in Facebook’s announcement of Libra, and the watchdog impact of IRS headlines with an outreach to taxpayers who have not complied with reporting requirements.

It’s no surprise that most charities have cryptocurrency on a list of avoided assets in their gift acceptance policy. The risks are not minimal to an organization: unwelcome publicity and brand impact, uncertainty of the valuation from one day to the next, privacy concerns and difficulty opening a commercial wallet and ultimately the anxiety of not being able to monetize the currency on your timetable.

There is however, considerable value inherent in these assets for certain donors. There are two discrete elements to gifting cryptocurrency assets:

  1. The donor must get a qualified appraisal for their tax reporting purposes. The key here
    is engaging a “qualified appraiser”.
  2. The other is finding a broker/agent who can manage the liquidation for you.

In the case of the occasional crypto donation, finding a partner who can assist in managing this charitable donation may be a better option than trying to manage the gift and liquidation internally.

Charitable Solutions and the Dechomai Foundation offer appraisal and donation services for charitable contributions of Bitcoin and other cryptocurrencies (legally however, we cannot offer both activities on the same gift). Like many illiquid assets, a gift of cryptocurrency can also be used to fund life income needs through gift annuity or remainder trust structures.

Our recent activity in this space include:

  1. Accepting over $50 million in crypto-related assets in 2018 through Dechomai Foundation
  2. Completing over 130 qualified appraisals through Charitable Solutions, LLC in the last 18 months
  3. Speaking (including at NCPP) and writing on the subject in Charitable Gifts of Noncash Assets, 2nd Edition (downloadable here)

We're happy to discuss cryptocurrency with you and your donors at any time, so feel free to give us a call. You can also review our offerings and services at charitablesolutionsllc.com.