Bitcoin Basics for Nonprofits! – Supply Chain Game Changer™

Cryptocurrency has already spawned many billionaires and others believe that the world’s first trillionaires will emerge in the next decade and they need to understand bitcoin basics for nonprofits.

Many people would choose to donate a portion of their wealth to a charitable organization like any other valuable asset.

Based on the knowledge of the Silicon Valley Community Foundation (SVCF), this paper lays out the basics for receiving and evaluating bitcoin and other cryptocurrency donations, as well as some important requirements for the preservation and handling of these properties.

SVCF made its first cryptocurrency donation in 2013 and has since received and traded a wide range of cryptocurrencies including Bitcoin, Bitcoin Cash, Ethereum and Ripple XRP.

The first step

Updating your policy on accepting gifts is a good way to do it. “The company may receive gifts in the form of cryptocurrencies and other types of digital assets after conducting due diligence to determine whether the asset is ready for exchange and liquidation,” the guidelines say, for example. On the other hand, you would choose to treat them as policy deviations so the right people review them before accepting them. If your company has agreed not to accept cryptocurrencies as gifts, your gift-acceptance policy should explicitly state the choice.

If you welcome such donations, keep in mind that most nonprofit organizations want to sell digital assets as soon as possible after receiving them, especially since the value of these assets can be very volatile. If you want to keep the cryptocurrency instead of selling it now, you’ll likely have to pay for it as an expense.

Because the account creation phase for charities takes a week or more due to know-the-client and anti-money laundering laws, it’s often a good idea to prepare ahead of time before accepting a single donation. More information can be found here Fast Profit

Third party providers

Receiving a Bitcoin donation can be done in a number of ways. The best strategy for your nonprofit organization would be determined by the form and volume of cryptocurrency being contributed, as well as your organization’s ability to deal with uncertainty and danger.

Although you can collect and store cryptocurrency in your own “wallet,” most nonprofit organizations (NFPs) tend to have cryptocurrency received, held, and sold on their behalf by a third-party “exchange” or payment processor. This service provider offers technological expertise, convenience and protection that most charities cannot provide on their own.

Some of the most well-known third-party providers

BitPay

BitPay is a Bitcoin payment processor based in the United States that offers a hassle-free solution for contributions, with an alternative donate button for the site. A donation invoice is created and sent to the donor with BitPay. Bitcoin or Bitcoin Cash is used to enable purchase by the donor. The funds are sent directly to BitPay, which is responsible for converting the coins and transferring the funds to the NFP the next business day. Bitcoin is never included in the NFP reports. A processing fee of 1% is charged via BitPay.

coin base

Coinbase is a cryptocurrency exchange headquartered in the United States that promotes Bitcoin, Bitcoin Cash, Ethereum and Litecoin. As of March 2018, the exchange has 20 million users. It is optimized for individual use while being easy to set up and use. Coinbase Prime is intended for more advanced institutional investors and corporate clients, but many nonprofits find it overly complicated. The first fee is 0.30 percent of the total amount owed.

bit stamp

Bitstamp is a Europe-based platform that accepts Bitcoin, Ethereum, and other virtual currencies. Individual and institutional accounts are supported by Bitstamp, which often includes two-factor authentication for added protection. The fees differ depending on the cryptocurrency.

The blockchain market is also still in its infancy. Fraud, malware, and government shutdowns are proving to be threats to online markets and third-party providers. It’s a good idea not to have more money in your online savings than you’re willing to lose.

As a result, an offline “cold storage” or “vault” is preferred for a significant gift that can be stored and sold over time. These are increasingly being sold in combination with switching platforms, and there are a variety of stand-alone options on the market.

Accepting Cryptocurrency Donations

As mentioned earlier, if your business does not wish to welcome cryptocurrency gifts, your policy on accepting gifts should reflect this. If you accept them, the method of getting and selling cryptocurrencies is similar to that of getting and selling gifts from publicly traded stocks:

  • To collect the donation, open a brokerage account with a reputable company.
  • The account number must be communicated to the donor.
  • Accept the asset.
  • Place orders to sell the goods and transfer the proceeds to your bank account.

Internal safeguards should be implemented at this stage, allowing multiple signers to open new accounts, setting thresholds for signing authority, and establishing separate duties for the transaction and reconciliation of accounts.

It is particularly necessary to plan in advance the mechanism and controls for cryptocurrency transactions as third party intermediaries in this area have not yet established the strict controls that exist in the financial services industry of banking.

Article on Bitcoin basics for nonprofits and permission to publish here provided by Jean Nichols. Originally written for Supply Chain Game Changer and published on May 17th, 2021.

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