In April, as India battled the second wave of the deadly COVID-19, Ethereum co-founder Vitalik Buterin donated ETH 100 and MKR 100 worth approximately $6,06,110 (roughly Rs. 4.5 crores) to the country's COVID-19 relief fund. Besides Vitalik, Australian cricketer Brett Lee also donated 1 Bitcoin to PM Cares Fund in the same month. Back then, Bitcoin was valued at $50,000 (roughly Rs. 37 lakhs). Sandeep Nailwal, the co-founder of Polygon, organised a crypto COVID-19 relief fund that received support from several investors and entrepreneurs, including angel investor Balaji Srinivasan. Now, with the growing popularity of cryptocurrency, many charities have started accepting donations in digital currencies. Several international charities accept Bitcoin and other cryptocurrencies as donations as well.
Let's take a look at how and why one makes donations in cryptocurrencies.
Saving on taxes
One of the biggest advantages of donating cryptocurrency is saving money on taxes. In the US, for example, an individual invested $2,000 (roughly Rs. 1.48 lakhs) in cryptocurrency a year ago. Then, following a boom, the person decided to donate a part of it or entirely to a charity. Now, the value of the person's investment, let's say, stood at $5,500 (roughly Rs. 4.09 lakhs). If the investor liquidates the investment and then donates in US dollars, the person might be subjected to long-term capital gains tax of up to 20 percent.
However, if the same individual decides to donate the amount in Bitcoin directly, there won't be any deduction on account of long-term capital gains tax on cryptocurrency. Since there are no regulations — not yet at least — for Bitcoin, the donations are completely tax-free.
Secondly, the cost of a transaction for an organisation receiving a donation is also less compared to an amount received through a credit or debit card. According to a report by Coinbase, the processing fee on credit card transactions may range anywhere between 2.2 percent and 7.5 percent. That marks a direct deduction from the principal charity amount.
Let's say you wanted to donate $500 (roughly Rs. 37,000) to a charity that accepts Bitcoin. A credit transfer that entails a processing fee of 5 percent will reduce the charity by $25 (roughly Rs. 1,800), but if you made the same amount of donation in cryptocurrency, it won't be more than a third of the amount you paid for the former.
Which organisations accept cryptocurrency as donations?
Despite its popularity, almost everyone is aware of how uncertain cryptocurrency can be. And while its usage is growing, it's still nowhere close to replacing mainstream currency. Having said that, many organisations have started accepting donations in cryptocurrencies.
Here's a list of some of the notable organisations that accept donations in cryptocurrency:
Apart from these, there are resources such as The Giving Block that allow people to donate cryptocurrencies and non-profit organisations to receive the same. It has a list of many non-profit organisations where you can donate cryptocurrency.
Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts. Affiliate links may be automatically generated - see our ethics statement for details.