Crypto charity: December 31 is a perfect day for philanthropy
Crypto philanthropists are a new type of benefactors who have emerged in the last five years. Today, non-profit organizations receive more donations in digital currency than in traditional fiat currency.
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According to the US Internal Revenue Service (IRS), crypto users donated more than $69 million to nonprofits in 2021. The majority of the funds were distributed to foundations that assisted Florida families affected by Hurricanes Ian and Nicole, as well as non-governmental organizations dedicated to combating global warming.
The EU countries' tax administrations report a more modest figure of $9.8 million. Europeans mostly donated to environmental causes and non-profit organizations that work with the LGBTQIA community.
The huge difference in amounts may be due to the fact that it is easier to get capital gains tax deductions in the US. European regulators are slow and conservative. They are skeptical about crypto philanthropy and are not eager to recognize such donations as a reason to lower income taxes. As a result, we can assume that some of the digital currency was unofficially donated.
What are the most likely reasons for donating crypto in 2022?
There are currently no complete statistics on crypto donations for 2022.
However, it is already clear that most of the money is raised for Ukraine. According to analysts at blockchain cybersecurity company Elliptic, non-governmental organizations have already raised $68.2 million in cryptocurrencies from February to November of this year.
Polkadot founder Gavin Wood contributed $5.8 million, and the NFT project CryptoPunk contributed more than $200k. There was also a $1.86 million transaction, which appeared to be the sale of NFTs created by Julian Assange and digital artist Pak.
The largest cryptocurrency donation in Ukraine came from the sale of the Eurovision-2022 crystal microphone trophy won by Kalush Orchestra. WhiteBIT, a Ukrainian cryptocurrency exchange, purchased it at auction for $900,000 in cryptocurrency and transferred the entire amount to Serhiy Prytula Charity Foundation.
Organizations that promote women's rights are ranked 2nd in terms of donations. Protests in Iran have found support among European and American philanthropists; approximately $8 million has already been raised to help women suffering from gender inequality as of November 1, 2022.
Global projects related to the environment (a little less than $4 million) and the protection of children's rights (about $3 million) take third place in terms of donation activity.
Money is also donated to solve local problems, such as the construction of a church, a park, or a shelter for homeless animals. However, the total amount of donations, in this case, does not go over $25,000 – 30,000.
In 2021, most donations were made using Bitcoin, Ethereum, TRON, and Solana. The majority of transfers were made in ETH ($30.8 million) and BTC ($25.9 million). The average amount was $10,455. Cash donations were much smaller — only $128. There is no doubt that the number of donations will increase in 2022. Furthermore, in addition to digital money, funds began to accept NFT donations.
Total volume of crypto donations in the USA, 2021 Source: The Giving Block
Why do people give the biggest donations at the end of December?
Charity traditions have long been established in Europe and the United States. Governmental and regulatory support played a significant role in this. In addition, donations made to recognized non-profit organizations significantly reduce the tax on short-term capital gains, which is assessed at a rate ranging from 10% to 37%.
Therefore, philanthropists have an additional incentive to do good deeds.
Donations include more than just fiat and digital currencies. Charitable foundations also accept NFTs, vouchers, stocks, and bonds. Any securities can be converted into specific assistance for those in need.
However, in order to be eligible for the tax discount, philanthropists must make a qualified donation by December 31, 2022. As a result, the donation boom typically starts on Christmas Eve and ends in the late evening of December 31. By this time, everyone has calculated their income for the year and decided how much they want to send to those in need, rather than leaving it in the tenacious hands of the tax authorities.
It makes sense, isn’t it?
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