A growing number of charities have developed technology to accept donations through digital cryptocurrencies, such as Bitcoin.
Bitcoin was once a niche form of currency and today it is the ninth most valuable asset in the world. Other popular forms of cryptocurrency include Ethereum, Litecoin, Cardano, Polkadot, Stellar and Binance Coin.
Cryptocurrencies offer huge opportunities for charities to increase their revenue and donations, by accessing an increasingly popular and easily transferable form of currency. However, this can also present challenges, particularly when it comes to security and complexity.
Here we will look at the benefits and challenges for charities using cryptocurrencies in their activities. digital transformationas well as some examples of players in the sector who are already exploiting this form of digital currency.
Benefits of Cryptocurrency
Cryptocurrencies are decentralized digital currencies, meaning they are used by the people involved in the transaction rather than a centralized government.
This leads to a key advantage: lower costs. Processing cryptocurrency transactions is much more cost-effective than processing traditional currency transactions, which require banks and other third-party financial companies to charge fees. There are other cost savings as well. Cryptocurrencies are not tied to geography, so currency conversion fees are not necessary.
Another advantage is transparency. Cryptocurrencies work using Blockchain technology, which involves distribution with each block in its distribution chain recorded with a cryptographic signature. This allows actors in the chain to easily see when changes are made and currency transactions can be traced.
For example, a donor who makes a donation can see at any time, thanks to the blockchain, how this money is used. This aims to increase public confidence in charities.
Although the transaction itself and the donation amount are transparent, cryptocurrency donations can be anonymized with relative ease. This makes it difficult to see who is donating.
Ethical challenges arise. Charities must ensure that they do not accept money from people or organizations that are criminal, have reputational problems, or are involved in activities that do not align with their core beliefs and values.
According to the Charities Aid Foundation report Give a little (coin): “Even when donations do not come from sources that break the law, questions about their moral status can still arise, which poses a challenge for charities. »
Another challenge lies in the way cryptocurrencies are produced. This process, called “mining,” involves considerable processing time and computing power.
This situation needs to be monitored to ensure that the environment is not damaged by the energy required for cryptocurrency mining. Increasing the use of renewable energy would mitigate this risk.
Cryptocurrency mining would now be consumes almost as much electricity as Argentina and Bitcoin’s energy consumption has more than quadrupled over the past four years.
Charities Accepting Cryptocurrency Donations
A wide range of charities including Save the children And RNLI, now accepting cryptocurrency donations. The move particularly helps those in the international aid sector respond more quickly to global events, while generally increasing donations.
A UK charity that accepts cryptocurrency donations is Helping households under great stress (HHUGS), which supports families affected by terrorism, national security and extremism legislation.
It is the first Muslim charity to accept Bitcoin donations. The charity said: “At HHUGS we are always looking for ways to make it easy for people to support us. That’s why we are now accepting Bitcoin donations.
“As the first Muslim charity to accept Bitcoin, we are ahead of the curve. We hope that through a currency as innovative as Bitcoin, we can open new avenues for people to support HHUGS and reach new donors and supporters.
“Based on our observation of future trends, it seems likely that we will receive digital currency as a donation at some point and we want to prepare for this eventuality.”
Largest cryptocurrency donation ever
In 2020, the Children’s Cardiology Unit Fund received a £38,000 cryptocurrency donation, believed to be the largest cryptocurrency donation to a UK charity. The donation came from two donors from the United States as part of the charity’s response to the COVID-19 pandemic.
CHUF Director of Fundraising and Operations said: “We are beyond grateful and truly overwhelmed by this generosity during these difficult times. »
This large sum was donated via the online platform The giving blockwell known in the United States but little used in the United Kingdom.
Dan Bainbridge, one of CHUF’s two cryptocurrency donors, said: “I have undergone heart surgery and have been personally supported by CHUF my entire life. I have always wanted to give back and, now working in the cryptocurrency field, I saw an opportunity to help CHUF prepare to accept cryptocurrency (bitcoin and Ethereum) donations online.