Nobody can deny that 2021 was a banner year for crypto. As the global crypto market cap skyrocketed past $3 trillion, banner currencies like Bitcoin and Etherium notched brand new all-time-highs while newer, more volatile currencies like DOGE and SHIB have made more risk-tolerant retail investors overnight multi-millionaires. These factors rewarded long-term holders handsomely and have attracted a larger swath of institutional and retail investors to the hunt to diversify their holdings and leverage these crypto assets as a hedge against inflation.
It’s increasingly popular to see cryptocurrencies being used as a tender for goods and services, but one trend that may be surprising to some is the meteoric rise of crypto in charitable giving. Fidelity Charitable – the largest grantmaker in the US – reportedly received over a quarter billion dollars in crypto this year to date, over four times the amount they received in 2017. It’s a safe bet at this point to plan for this trend as more wealth is transferred to millennials. Fidelity has reported that 47% of millennials view cryptocurrencies as a smart investment, compared to 18% of Gen X and 6% of baby boomers. This is likely to increase even further as Gen Z fully enters the workforce and builds wealth.
This creates a host of challenges for nonprofit organizations and grantmakers who need to be able to accept and account for crypto donations.
Retail Crypto Investors and Charitable Giving
Interestingly, cryptocurrency investors are a disproportionately charitable group of investors. In the tax year 2020 for example, over 40% of crypto investors gave over $1,000 to charitable causes, compared to only 33% of all investors. Generation also has a significant impact on charitable giving. 88% of millennials reported that charitable giving is an important part of their life, compared to 71% of Gen X and 69% of Baby Boomers.
These factors combined indicate that crypto charitable giving will only continue the break-neck pace of growth as more wealth transfers to millennials and Gen-Z over the next couple of decades.
More interesting still is the fact that of the crypto investors surveyed that did not participate in charitable giving, 10% cited the primary reason being that it is difficult to find nonprofits that accept crypto donations. Nonprofit organizations are leaving potential donations on the table simply by not offering cryptocurrencies as a method of tender.
Your Organization Must Be A Trusted Custodian
As the custodians of an increasing amount of cryptocurrency, grantmakers need sophisticated financial accounting systems to track cash and fixed assets in a single fund, view financial reports by multiple dimensions, and trigger rebalancing, fees, and journal entries on a scheduled basis. By automating these processes and daily activities, these organizations can give their staff more time to focus on strategic initiatives, meet with supporters, connect with grant recipients, and advance the organization’s mission.
Have an Informed Technology Strategy
An organization that receives $10,000 in cryptocurrency for a specific cause needs to be able to connect to the cryptocurrency marketplace, allocate the funds, and record the value of the assets in the donor’s portfolio. The same organization may receive a home as a donation the following day, or an LLC. These varied contributions must be accounted for and allocated properly both from the foundation and the donor perspective.
Of course, none of these goals are achievable using outdated systems and add-on applications—none of which talk or interact with one another. Plative has worked with numerous foundations that have patched together separate customer relationship management (CRM) software, accounting systems, and donor/grant portals to unify their business management processes. Many of these organizations have replaced their Blackbaud CRM systems with Salesforce to create a more stable, secure donor management platform. This presents a clear opportunity for the groups to move away from their aging systems and over to the NetSuite cloud enterprise resource planning (ERP) system and integrate directly with Salesforce.
Silo’d Data Will Slow You Down
The way organizations handle donations, transfer money between funds, balance those funds, and ensure proper internal operations has become extremely complex. Using true fund-based accounting, for example, organizations need tools that allow them to manage and track funds, view financial reports by multiple dimensions in real-time, and automate rebalancing funds on a scheduled basis. They also need workflow automation that can effectively remove bottlenecks by automating common tasks and eliminating redundant workflows.
Plative’s Role
As a Salesforce and Oracle NetSuite implementation consultancy, we’re uniquely positioned to advise both grant-making organizations and nonprofits alike on their fundraising and grants management processes. Our financial services practice also works with many of the world’s up-and-coming crypto and blockchain exchanges, asset managers, and technology companies so we can bring an informed perspective to your cryptocurrency strategy. Let’s start a conversation.
