Rich by Coin

Nonprofits can either convert crypto donations to cash immediately or hold them as an investment. Cryptocurrency is treated as a property donation by the IRS, not as a currency donation. Experts advise nonprofits to seek professional financial guidance before accepting and managing cryptocurrency.

Nonprofits and cryptocurrency donations are increasingly being used to put old-fashioned money in the bank. Cryptocurrency valuations over time have led more nonprofits to accept crypto and either convert to cash or hold for potential long-term gains.

Fundamental barriers include uncertainty about how it works, price volatility, tax implications and regulatory considerations. But ongoing fundraising strains and the potential upside from crypto are pushing nonprofits to explore this funding source. Additionally, many groups lack an operational channel to accept crypto and have not updated internal investment and donation policies.

The IRS’s “Frequently asked questions on virtual currency transactions” page lists IRS notices and links to pages dealing with crypto’s tax implications. A nonprofit with crypto donations can’t go down to the bank and hand them to a teller to cash in the donations. Financial institutions use third-party processors, just as nonprofits would use exchanges to convert.

Guidance from the National Council of Nonprofits outlines crypto donation practices and conversion considerations. Nonprofits can seek to convert their crypto donations to cash as soon as the donation is in hand. If Bitcoin, the amount, even if well off the high, will still likely be substantial.

The question confronting every nonprofit looking at a crypto donation is whether to sell or buy and hold? The decision depends substantially on the organization’s immediate needs — and if they’re willing to bet the value will increase — because that’s what it is, a bet. Nonprofits are best advised to seek the advice of accounting or finance professionals fluent in cryptocurrency language and disposition strategies, and who walk nonprofit leaders through the substance of crypto merits and demerits. The outcome will give a stronger basis for decisions on if, when and how much money from a crypto donation will actually go into the bank.