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Crypto is Changing the landscape of Philanthropy

Crypto is Changing the landscape of Philanthropy

The traditional way that people give to charities varies substantially from crypto philanthropy. Donor demographics, financing structures, and even the motivations for donating are all shifting, revealing the differences.

The increasing frequency of stock and crypto donations suggests that this kind of giving will have a huge long-term impact on the charity sector, and may even revolutionize philanthropy. The availability of cryptocurrency for charitable giving has already prompted fresh waves of younger people to look into and investigate philanthropy. This has really benefited smaller charities who are often ill-equipped to compete with larger organizations for contributions, but these may only be the beginning steps as digital assets become more ingrained in our lives.

Donations to cryptocurrency are skyrocketing

Last year was characterized as having the largest amount of cryptocurrency donations. According to Fidelity Charitable, a nonprofit that assists contributors when it comes to charitable giving, 45 percent of cryptocurrency investors gave to charity in 2020, compared to 33 percent of all investors. Back in 2020 Fidelity Charitable $28 million, before receiving roughly $331 million in crypto last year. Giving Block, a crypto contribution platform, announced $69 million in total donation volume last year in its annual report, a staggering 1,558 percent increase over 2020.

The simplicity with which cryptos may be sent to any area of the world allows charity organizations to receive contributions from all over the world. Many worldwide charities have begun to accept cryptocurrency donations. To cope with cryptocurrency, UNICEF developed CryptoFund, a new financial entity. Several large organizations, like the Red Cross and Greenpeace, have also started accepting cryptocurrency.

Being able to accept crypto has enabled many nonprofits to accept donor support, who have been unable to obtain money due to government restrictions. WikiLeaks, an international non-profit that distributes news leaks, was banned by the US government in 2010, and its funding was restricted by Visa (V), Mastercard (MA), and PayPal (PYPL). WikiLeaks is now receiving millions of dollars in cryptocurrency donations. Despite its meteoric rise, Bitcoin and cryptocurrency philanthropy remains a specialized type of giving that varies in many ways from traditional techniques.

Cryptocurrency users are, on average, significantly younger than traditional philanthropic givers. Over 60% of Bitcoin users are under 40 years old. The average age of crypto users in the United States is 38, while the average age of donations is 64.

In 2014, United Way, a global nonprofit organization, began accepting cryptocurrency. According to website analytics, the typical user is 45 to 65 years old, and 80 percent of them are female. Meanwhile, the average age of visitors to United Way’s crypto contribution site is 25 to 35 years old, with males accounting for 80% of the total. Cryptocurrency is attracting a big number of young individuals to philanthropy.

Responding to social media-advertised causes

The majority of Bitcoin donations are made by young, tech-savvy individuals who support causes that are gaining traction online. These contributors may be moved by sincere stories and personal connections to specific events. For example, narratives about the Russia-Ukraine conflict that were circulated on Twitter resulted in around $100 million in Bitcoin donations to help support Ukraine.

When India was dealing with the second wave of the COVID-19 pandemic, social media became a COVID-19 helpline with a worldwide reach, which ended up resulting in crypto contributions as well. Ethereum co-founder Vitalik Buterin was one of the contributors, donating about $1 billion in shiba inu (SHIB) tokens to India’s COVID-19 relief, which skyrocketed in value around the same time.

The Tor Project, a well-known non-profit dedicated to internet freedom and anonymity, received 58% of its donations in cryptocurrency in 2021. This generosity highlighted crypto contributors’ preference for data privacy above other causes.

To be sure, some cryptocurrency contributors may be unsure which non-profit or cause to support. But that’s a common problem when it comes to charitable giving.

Giving Block has just created impact index funds, sometimes known as cause funds. These funds will assist contributors in making educated judgments and may expose them to options they would not have considered otherwise.

Traditional giving has tended to favor well-known charities. Many funders have favored foreign charitable groups that are adept at reporting their accomplishments, but this tendency may be hurting smaller but equally deserving organizations.

Education, disaster assistance, food, and the environment are all covered by cause-based funding via crypto contribution platforms.

Donors can support a certain cause rather than a specific non-profit organization, and all non-profits will receive an equal percentage of the given funds. This system ensures that smaller non-profits are treated equally and that the greater cause receives more attention than larger, more well-known non-profits.

Transaction costs are lower

Donors may be drawn to crypto philanthropy for a variety of reasons. Donations are a way for crypto investors to avoid paying capital gains tax. Donating long-term valued assets directly can also help charities raise more money, and donors and non-profits can save money on transaction costs charged by typical financial services platforms.

According to the 2020 “Global Trends in Giving Report,” transaction costs for getting crypto donations are lower than those for receiving credit or debit card donations, which were the preferred form of giving for 63 percent of contributors globally. According to Charity Navigator, credit card processing fees, which are deducted directly from the donation amount, can range from 2.2 percent to 7.5 percent.

Meanwhile, a $2,000 wire transfer from the United States to India may cost $30 to $50 more in processing fees. When transferring the same amount over the Ethereum network, the gas fees might range from $10 to $15. Furthermore, there exist blockchains with significantly lower costs. Furthermore, crypto transactions might take as little as a few seconds or minutes, but cross-border currency transfers can take hours or even days.

Deductions for taxes that are appealing

Cryptocurrency donations to non-profits are tax deductible in the United States, the United Kingdom, Canada, Australia, and New Zealand, among other countries. Converting crypto to fiat, on the other hand, may result in capital gains taxes.

An investor can deduct the fair market value of a coin at the time of a gift by providing a long-term valued asset directly. For instance, if you purchased a cryptocurrency for $1,000 and it increased in value to $2,000, you may deduct the $2,000 value.

If you convert $2,000 to fiat, you must deduct 20% of the $2,000 in taxes paid from the contribution amount. As a consequence, investors can save anywhere from 20% to 30% on taxes.

It is simpler for nonprofits to target existing contributors than it is to recruit new ones. But with that said, as the demand to donate grows, many contributors choose to stay anonymous. Similarly, contributing a large sum of money may necessitate the completion of know-your-customer (KYC) and other forms of personal identification.

Donating in cryptocurrency allows contributors the option of maintaining their anonymity – even while making large donations. However, as several nations tighten their crypto legislation, such anonymity may not continue long.

More than 1,300 NGOs accepted cryptocurrency donations as of 2021. Crypto philanthropy is driving young people to donate by enabling unprecedented levels of direct donations and cause-based impact investing. As a result, the shift from organization-focused to cause-based financing will encourage small NGOs to adopt cryptocurrency.

These innovations have the potential to create new opportunities for NGOs while also disrupting existing donation practices, such as the work being done by Overflow.co

US Government Investigating the “Risks” & “Benefits” of Crypto

US Government Investigating the “Risks” & “Benefits” of Crypto

[ CRYPTO MARKET ] The government is investigating
“Consumer and investor protection”, “financial stability”
and other STUFF

On Wednesday, US President Joe Biden issued an executive order directing the federal government to investigate the dangers and advantages of cryptocurrencies.

It’s been a long time coming, and the crypto industry has been waiting for it, not least because of mounting regulatory concerns throughout the world about the young digital asset market.

There had been rumors of a rift between White House officials and Treasury Secretary Janet Yellen, which had caused the policy’s implementation to be delayed.

The bitcoin market learned about the executive order overnight after the Treasury unintentionally issued a statement calling it “historic” and leaking certain facts ahead of time.

On Wednesday, the order was ultimately signed. According to a White House information sheet, it asks for federal agencies to take a uniform approach to the regulation and monitoring of digital assets.

The guideline places a strong emphasis on consumer protection. There have been several reports of investors falling prey to cryptocurrency scams or losing large quantities of money as a result of cyberattacks on exchanges or users.

The Biden administration has asked the Treasury Department to analyze crypto and make policy suggestions. Regulators should also “provide proper control and safeguard against any systemic financial risks presented by digital assets,” according to the report.

While governments have been careful to dismiss any systemic dangers associated with cryptocurrency, worries about the role of stablecoins have grown. These are digital tokens that are supposed to be tied to actual currencies like the US dollar.

Tether, the world’s largest stablecoin, has drawn the wrath of authorities amid claims that its token is not properly backed by dollars kept in reserve. Tether claims that its coin is completely backed, although its reserves are made up of short-term financial liabilities such as commercial paper, not only cash.

Stablecoins were noticeably omitted from the White House announcement on Wednesday, despite Yellen’s stated desire for Congress to provide legislation for the industry.

Another major objective of Biden’s executive order is the abolition of unlawful crypto activities.

President Biden has called for a “unprecedented emphasis of concerted action” from government agencies to combat illegal finance and national security threats presented by cryptocurrencies. He’s also calling for international cooperation on the subject.

Last month, US authorities confiscated $3.6 billion in bitcoin — their largest cryptocurrency seizure ever — in connection with the 2016 breach of crypto exchange Bitfinex.

Following Russia’s invasion of Ukraine, officials are increasingly concerned about the use of cryptocurrency to enable sanctioned Russian people and corporations circumvent the sanctions.

However, proponents of crypto argue that laundering money with digital currency is extremely difficult since all transactions are recorded publicly on the blockchain, which is an immutable record-keeping system.

Biden also mentioned the enormous energy cost embedded into digital currencies like bitcoin, but it was a more subtle remark. He wants the government to look into methods to make crypto innovation more “responsible” (less harmful to the environment).

To confirm transactions and produce additional units of money, Bitcoin uses a method known as proof of work. To mine bitcoin, a decentralized network of computers competes to solve challenging arithmetic riddles. A miner’s chances of getting paid in fresh bitcoin increase as their computer power increases.

This has alarmed officials throughout the world, with China banning cryptocurrency mining entirely last year. This prompted a crypto mining migration from the nation to the United States and other countries, including Kazakhstan.

The White House statement includes wording aimed at giving the United States a competitive advantage over other countries when it comes to crypto development. This is especially important now that cryptocurrencies have been essentially outlawed in China.

The Department of Commerce has been entrusted by Biden with “creating a framework to advance U.S. competitiveness and leadership in, and exploiting, digital asset technology.”

Several crypto industry leaders, including the CEOs of Coinbase, Kraken, and the Winklevoss twins’ Gemini exchange, have urged for such action.

Biden “has the chance to assure America stays the world leader for technical innovation for years to come,” according to the Blockchain Association, which represents a number of well-known crypto firms.

Finally, the Biden administration wants to look into creating a digital currency.

It comes as China has taken the lead in the development of central bank digital currencies, or CBDCs, with an increasing number of people utilizing smartphones to make payments and manage their affairs.

Biden has been tight-lipped about whether the United States should develop its own digital currency. Rather, he is urging the government to make CBDC research and development a “top priority.”

Last year, the Federal Reserve began looking into the possibility of issuing a digital dollar. The central bank issued a long-awaited research outlining the benefits and drawbacks of such virtual money, but it has yet to say whether the US should create one.

While CBDCs have the potential to significantly speed up payment settlement, governments are considering a variety of concerns about financial stability and privacy.

The new policy agenda eliminates a major source of uncertainty for a sector that has already seen multiple regulatory snags and scandals.

But does government intervention into how a decentralized currency can or can’t be used fundamentally alter the core idea of cryptocurrency itself?

The US Securities and Exchange Commission fined crypto start-up BlockFi a record $50 million earlier this year on charges that its retail lending product violated securities rules. The fine was part of a wider settlement of $100 million that included payments to 32 jurisdictions.

Coinbase ran into some problems with the watchdog as well, although it was able to avoid penalties. Coinbase was threatened with legal action by the Securities and Exchange Commission (SEC) for a programme similar to BlockFi’s that offered consumers interest payments on their crypto holdings. Following that, the corporation abandoned its ambitions for the service.

On Twitter, Jeremy Allaire, CEO of crypto startup Circle, wrote, “This is a watershed moment for crypto, digital assets, and Web 3, equivalent to the entirety of government waking to the commercial internet in 1996/1997.”

Investors in cryptocurrencies appeared to agree. Bitcoin prices soared beyond $42,000 on Wednesday as investors cheered the US executive move.

US Government Investigating the "Risks" & "Benefits" of Crypto

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Coinbase & Binance Pressured to Freeze Russian Accounts

Coinbase & Binance Pressured to Freeze Russian Accounts

Coinbase and Binance reject demands for a blanket ban on Russian users,
as critics claim their platforms are being used to side step Western sanctions

By continuing to do business in Russia, the two exchanges are deviating from mainstream finance, according to anti-money laundering specialists and European authorities, weakening Western efforts to isolate Moscow.

In a series of tweets on Friday, Coinbase Chief Executive Officer Brian Armstrong stated, “We think everyone deserves access to fundamental financial services until the law states differently.”

However, if the US government decides to implement a blanket ban, the exchange will enforce it, according to Armstrong.

In an emailed response to Reuters, a representative for Binance, the world’s largest crypto exchange, stated, “We are not going to arbitrarily suspend millions of innocent consumers’ accounts.”

Both crypto exchanges have said that they will abide by government sanctions.

Major cryptocurrency exchanges have been asked to prohibit their services in Russia in order to prevent sanctioned organizations from utilizing cryptocurrencies to store their assets. The exchanges, on the other hand, claim to be well-equipped to prevent misuse of their systems.

Following Russia’s invasion of Ukraine, the price of bitcoin has risen as people in those nations want to keep and move money in anonymous and decentralized crypto.

This is a perfect example of how a decentralized currency can be used outside of government control.

We can see how the same financial instrument can be used to both: fund Ukrainian resistance, allow Russians to transfer wealth around imposed sanctions.

That is, of course, so long as the exchanges themselves are outside the government’s reach.

 

Coinbase & Binance Pressured to Freeze Russian Accounts

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