There are a number of questions that are likely to be at the forefront of any charity’s mind if the suggestion of taking crypto donations arises. Among them:

Complexity

Anyone coming to cryptocurrency for the first time may find it a bit bewildering. There are over a thousand cryptocurrencies on the market now — many of which make pretty elaborate and grandiose claims about why they are the best, and often have armies of online fans who will vigorously defend them whilst rubbishing their competitors. Furthermore, there is  a whole new lexicon to familiarize yourself with (‘mining’, ‘blockchain’, ‘consensus protocol’, ‘forking’, ‘hash function’, ‘proof of work’, ‘proof of stake’ etc.) For outsiders, this may all seem a bit off-putting.

Volatility

The second objection might be that even if a charity grasps enough of what cryptocurrencies are and how they work to feel confident getting involved, they might feel that these assets are just too volatile to fit within acceptable risk parameters. It should be fairly clear from point 1 that I think this is basically right: I wouldn’t recommend that any charity embarked on buying cryptocurrency as an investment. Apart from the fact that most CFOs and trustees would probably turn green at the very suggestion, it just seems impossible to justify with respect to the relevant fiduciary duties etc.

But before you totally rule it out, we should consider the positive case for why charities might want to negotiate the challenges outlined above in order to harness crypto donations. The main reason is because there is clearly money in this world — and lots of it. This may also be a pool of wealth that provides particularly fertile ground for philanthropic fundraising. This is partly because there are still relatively few organizations vying for donations from this source. But it is also because many of the people who have made it big in cryptocurrency have done so primarily by virtue of being early adopters — due to an interest in the technology or the libertarian ethos behind cryptocurrency — and have subsequently found themselves sitting on fortunes that they never expected to have.

Read the full article about the opportunities and challenges of cryptophilanthropy by Rhodri Davies at Charities Aid Foundation.