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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 hit the headlines over the past few years. Since Jan 2017, Bitcoin has increased from $900 to $18,000. The markets for crypto had their ultra-peaks in late ‘17 and early ’18, but were generally depressed through the latter half of 2018, and lost further ground in the first quarter of 2019. But have recently been on the rise at a rate outpacing the markets in general, and Bitcoin has increased in value by nearly 150% in 2020 alone. Notwithstanding the highly publicized highs, Bitcoin and other cryptocurrencies remain an appreciated asset for long term holders.
Through this period, we’ve seen the negative media coverage 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: 1) unwelcome publicity and brand impact, 2) uncertainty of the valuation from one day to the next, 3) privacy concerns, 4) difficulty opening a commercial wallet and 5) 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:
- The donor must get a qualified appraisal for their tax reporting purposes. The key here is engaging a “qualified appraiser.”
- The other is finding a broker/agent/exchange to manage the liquidation.
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, LLC and the Dechomai Foundation offer qualified 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 includes:
- Accepting more than $50 million in crypto-related assets since 2018 through Dechomai Foundation
- Completing over 200 qualified appraisals through Charitable Solutions, LLC.
The December session of our ongoing webinar series reviews the challenges and rewards cryptocurrency donations. Register here for one of our 60-minute sessions: