How Non-Profits Are Cashing In on the Cryptocurrency Boom
The ultimate philanthropic potential of digital currency may lie in the developing world, where high exchange rates, bank fees and inflation can dilute the buying power of international donors.
Bitcoin mining USBs on a large USB hub. Image: Shutterstock
Bitcoin is often discussed as the backbone of the online drug trade, an interesting speculative investment, or simply a futuristic way to order pizza. But proponents say the cryptocurrency also has great potential for the nonprofit world.
So far, nonprofits accepting Bitcoin donations report seeing contributions from early adopters whose initial investments in the currency skyrocketed in value, to the particular benefit of charities that appeal to Bitcoin’s technolibertarian roots.
"As far as the Bitcoin community is concerned, from what I've been able to tell thus far, they seem to be really interested in funding more technology-related things or more liberty-type, freedom-type things,” said Connie Gallippi, the founder and executive director of the BitGive Foundation, which coordinates and facilitates Bitcoin giving tied to the environment and global health. "And I think that it's sort of indicative of the early adopters and the sort of core Bitcoin community where it originated."
In late fall 2013, when the digital coins were valued at about $1,000 each, the angel investor, onetime Libertarian candidate for California state senate and Bitcoin evangelist Roger Ver donated $1 million worth of the currency to the pro-laissez faire Foundation for Economic Education.
In a statement released on YouTube, Ver called Bitcoin “one of the most important inventions ever created.” FEE-published writings by pro-capitalist thinkers like Murray Rothbard helped him understand the currency’s potential for limiting government power, he said.
“I will proudly continue to promote Bitcoin full time because I see it as the best chance the world has ever seen at creating a more peaceful society in which all human interactions are voluntary, and outside groups of people calling themselves the state are no longer able to violently interject themselves into the affairs of others,” said Ver, who is sometimes referred to as “Bitcoin Jesus” for his work promoting the currency.
But advocates say Bitcoin’s ultimate philanthropic potential may lie in the developing world, where high exchange rates, bank fees and inflation can dilute the buying power of international donors.
“This gets around the problems of Western Union,” said Elizabeth Ploshay, who serves on the board of the Bitcoin Foundation, the organization that steers the development of the currency and its underlying software. “It gets around the problem of banks closing down."
And at about the same time as Ver’s donation, after Typhoon Haiyan struck the Philippines, the nonprofit Fr33 Aid began soliciting Bitcoin donations to help buy food and medical supplies for those in need, ultimately sending almost $14,000 in funds to help those affected by the storm, according to the group’s blog.
"A lot of those people who got in early to Bitcoin are of a sort of libertarian bent, and I know that sometimes libertarians have a reputation for being selfish and heartless,” said Stephanie Murphy, the group’s operations director and a libertarian-leaning radio and podcast host. “But actually, a lot of them do care a lot about charities and sort of alternatives to government means of solving problems."
While the organization reported some of the funds were converted to U.S. dollars and sent through PayPal, it was able to save several hundred dollars in PayPal fees by sending some of the donations as actual Bitcoin, said Murphy, who is also a libertarian-leaning radio and podcast host.
"A lot of those people who got in early to Bitcoin are of a sort of libertarian bent, and I know that sometimes libertarians have a reputation for being selfish and heartless. But actually, a lot of them do care a lot about charities and sort of alternatives to government means of solving problems."
“We had a contact who was living in the Philippines and we sent the Bitcoin to him,” she said. He was then able to trade the Bitcoin for local currency with the help of Local Bitcoins, a site listing people around the world willing to exchange Bitcoins for cash or vice versa.
And for some charitable recipients, doing business in Bitcoin can mean more than simply saving on transaction costs, she said. The Women’s Annex, which began providing Internet access and a blogging platform to women in Afghanistan and now operates around the world, pays women based on their posts’ traffic.
"It was founded by two women in Afghanistan, and they've recruited a lot of women to blog for the website," said Murphy.
But paying the bloggers is a challenge, since not only can fees to wire money to Afghanistan come to as much as 20 percent, but many of the women blogging on the site can’t easily hold on to cash or open bank accounts without their families finding out, said Murphy.
"If they were to make some money, their family would probably take it,” she said. “They can't really have access to cash."
But as of this year, the bloggers are paid in Bitcoin, which they can receive more discreetly.
Women can exchange the Bitcoin locally for cash as needed through a service like Local Bitcoins or potentially use for online purchases, according to a post on the site. Murphy said the group is also encouraging merchants in the areas it serves to accept Bitcoin, which women can potentially send through their cellphones.
“There are several different ways to use Bitcoin just by text messaging,” she said.
Giving Bitcoin can also help donors to controversial causes stay anonymous, too, she added. "Perhaps you don't want your church to know that you donated to Planned Parenthood," she said.
And, since cryptocurrency isn’t widely accepted throughout the world, other charities have still found success accepting donations in Bitcoin and its rival money systems, then exchanging it for traditional funds.
Like Fr33 Aid, the Bitgive Foundation also raised Bitcoin donations in the wake of last year’s typhoon, raising almost $5,000 for the group Save the Children in just one day, Gallippi told me.
"For Save the Children, they had heard of Bitcoin and they were considering taking Bitcoin, but they had a lot of questions," she said. "For them, they see the benefits, but they also have a lot of questions about the legalities and accounting."
Ultimately, Bitgive collected donations in Bitcoin, then exchanging them for dollars, which it gave to Save the Children, she said.
Dealing with the legalities of Bitcoin donations has generally gotten easier, at least in the US, after the Internal Revenue Service issued a notice in March saying digital currency should be treated as property similar to stock.
"That was one particular regulating hurdle that needed to be jumped,” said Brian Brown, a spokesman for the Multidisciplinary Association for Psychedelic Studies, a group that promotes research into the therapeutic benefits of psychedelic drugs that’s raised about $32,000 in Bitcoin donations last year.
"People now know how to file their taxes and know that what they're doing is understood by the government and legal,” he added.
Like many charities, MAPS cashes out Bitcoin for dollars as they’re received, not wanting to plan for the currency’s volatility. The group has seen a lower rate of Bitcoin donations since the price declined from a high of more than $1,000 to less than $500 today, Brown said, and other charities have reported a similar experience.
“There’s that thing called the wealth effect,” said Peter Chasse, the founder and president of The Water Project, a group funding access to clean water around the world. "They look at the balance at the bottom of the piece of paper and say, ‘well I'm a lot less wealthy than I was yesterday,’ and they give less in that environment."
But The Water Project has still seen success raising money not only from Bitcoin users but from the communities around other cryptocurrencies as well, Chasse said.
"We've listed, I think now, about five different coins that have all stepped forward and said we'd like to do a campaign,” said Chasse, who in January published a blog post entitled “Welcome Cryptos,” encouraging cryptocurrency donations and looking forward to when digital currencies will reduce the costs of transferring funds to partners overseas.
“A lot of them do have a real push to be charitable,” Murphy said of the newer cryptocurrencies.
“Doge is one that’s gotten a lot of press,” she said, referring to the meme-inspired Dogecoin used to raise money to fund the Jamaican bobsled team’s trip to the Sochi Olympics, for the service dog charity 4 Paws 4 Ability, and most recently, for the paint job on a NASCAR car. Dogecoin’s also used extensively for charitable micropayments, like tips to bloggers, she said, actually benefitting from its relatively low value.
“You can send someone 5,000 doge and it's like $2, but they're like 'hey, I got 5,000, it feels pretty good,'" she said.
And some early adopters of Bitcoin report similar feelings about watching coins they bought or mined on a lark go from being worth pennies to hundreds or thousands of dollars.
One Bitcoin donor to MAPS, James Evans, told me he’d long followed online discussions of digital cash and mined a few Bitcoin soon after the currency made its debut.
"Lo and behold, it turns out to be the cryptocurrency that the world is using, at least for the moment,” said Evans, who told me he also made early investments in companies developing specialized mining hardware and is invested in other businesses in the Bitcoin world.
"I think it's difficult for people to donate psychologically because the price is so volatile.”
Evans initially donated thousands of dollars worth of Bitcoin to MAPS and to support the privacy-optimized Linux distribution Tails. He had initially hoped to start a movement to contribute Bitcoin to a new charity each month, but that hasn’t taken off yet, with many early adopters holding on to their Bitcoin and hoping for another price spike, he said.
"I think it's difficult for people to donate psychologically because the price is so volatile,” he said, though he argues it still makes sense for Bitcoin holders to donate, since charities can often do a lot with even a smaller amount of funds.
Taking and transfering small donations without losing too much to PayPal or credit card transaction fees is a big potential benefit of Bitcoin donations, said Chasse. He can envision a time when, with Bitcoin more widely used, The Water Project will be able to economically send smaller amounts to more organizations overseas for smaller-scale pilot projects, he said.
"The promise of Bitcoin, the promise of cryptocurrency, is you can begin to remove some of those fees,” he said. "It's exciting to think about lowering some of the barriers."