Could the Next Bull Market Be Record-Setting for Crypto Donations?

It's giving Tuesday and the giving blocks 2024 crypto market outlook for nonprofits reports says nonprofit fundraisers can benefit from the crypto market entering a new period of growth. Joining us now to discuss is Pat Duffy co-founder of the Giving block, which is a platform that helps nonprofits fundraise. Welcome Pat. Hey, thanks for having me. Thanks for being here. Now, first set the stage for us. What were crypto donations like this year at the giving block? Given all of the events that have unfolded since this time last year? Yeah, it's a, it's a super interesting year for crypto philanthropy. So we tell nonprofits all the time. We work with a couple of 1000 that bull markets look different than bear markets. Um A couple of years ago, we had our best year of all time. Um We've raised a little over 100 and $30 million total for charities. Uh Last year came down a little bit, of course, with the Bear market and then the events and end of year FTX. This year, we've seen uh a bounce back for sure. So more nonprofits taking crypto gift size is starting to increase uh it seems like donors are kind of waking back up seeing some, some gains in their pockets and wanted to do something good with it. How much of this uh is affected by regulation? Because uh obviously we have serious issues and serious questions going on right now uh with the future of crypto and how it will be regulated, particularly in the United States. Uh What kind of effects does it have positive or negative on uh on donations? I there are people, for instance, donating a lot now, just in case they have to uh account for, for their crypto in the future. Yeah, it's a great question. Um The main way it impacts it is just confidence in the market, right? So it's the same way it impacts prices when we see regulatory frameworks coming into place. And people kind of trusting that um the markets will be a bit more stable and more traditional financial institutions will pour money into this space. We see, um prices go up and the biggest driver of why people give is ultimately on an annual basis. There's that tax deadline at the end of the year where if a donor transfers appreciated crypto to a nonprofit, that's a 501 C three in the US, in particular, um that donor gets a write off of the full amount that they donate and then they also owe no capital gains taxes on that appreciated crypto because that's been the same way for forever when it comes to stocks, people expect it to be the same way with crypto. Um So the regulatory piece is definitely helping people um have more confidence in the space. I think make this a more traditional part of their given. Uh But I don't think people are, are nervous necessarily that the policies will impact the philanthropic side of it. I want to talk about the tax piece a little bit. We just saw a chart up on the screen that uh outlines the difference between selling crypto assets and then donating the cash you get from selling those assets and then versus donating crypto right to a non profit break this down for us. How long do I need to hold on to my crypto to benefit from not paying tax on this donation? Is there any kind of timeline here? Yeah, it's amazing. So we always try to turn this into a bumper sticker and it's impossible. Um But the short of it is if you have an appreciated asset and that's crypto for a lot of people. Um but it can be stocks, it can be, you know, a car, it's property or state, you can donate appreciated property to a 501 C three nonprofit in the US. And you don't owe capital gains tax on the appreciation and you also get the full value as a write off against your income. So, for instance, if I'm giving a million dollars to a charity. And I give that with appreciated crypto, um, I could give that transfer to the nonprofit in a matter of seconds. I get to write off a million dollars worth of my income. Which state and federal, right could be half a million, um, in extreme cases. And then on top of that, half a million in savings on your income tax if you, you know, this is a bit cheap. But if the cost basis was, let's say a dollar on that million dollars in the most extreme state and federal right could be $300,000 in additional savings. So a million dollar gift, you could have um $800,000 in tax benefits. The main issue with crypto users is most people don't know about this and because of culture and diamond hands, laser eyes, all that good stuff. Uh A lot of crypto users still donate their cash just because they're simply unaware of the fact that like one of the best ways to stack that is to donate crypto and then move the cash you would have donated into a new crypto position. Instead, doesn't that limit though? Uh I I, so if you isn't it limited to charities that will take crypto. First of all, second of all, um does it matter what kind of vehicle uh you use to donate that crypto? In other words, if you're donating it, using uh uh some sort of third party that converts it to dollars and then send the, sends the dollars over to um to a, uh to a uh a charity. Uh Does it affect your taxes? Yeah, both cases. Yeah. So this is like the, um this is kind of the scary part of it. And one of the reasons that, um in addition to that the giving block, we created the main solution that nonprofits used to take crypto directly. We also uh thanks to Mike, our first hire, uh aggregated the nonprofits that we support who take crypto and we have their tax status right above the donate button on their profiles on the giving block.com. Um When you give the donation directly to a 501 C three nonprofit, you transfer the appreciated crypto directly to uh a wallet in the nonprofit's name. In this case, it's a exchange account on the back end that automatically liquidates it. So the charity doesn't have to deal with a price volatility. You as the donor then get the write off because you haven't triggered a taxable event. So you ask another good question if you try to give that to a third party or if you try to sell the crypto and donate the cash instead, if it moves into the hands of a third party who's not a 501 C three charity, um If you sell it and then you give the cash or if you donate it to a charity that doesn't have 501 C three tax status at all. Like they might seem like a great organization, but maybe they haven't been approved by the IRS. Any of those things would mean that you don't get those tax incentives. Um which again, on a million dollar donation, why this is so important you could have a donor getting stuck with hundreds of thousands of dollars in unnecessary tax liability. A text conversation has never been so vivacious on this on this show. I got to ask you for a follow up here. I know back in September, the giving block submitted a response to an open letter from two members of the Senate Finance Committee looking for input into tax uncertainty surrounding digital assets. Any update there? Yeah, I mean, this, this comes from a couple sources. One, my co-founder, Alex Wilson is just um really dial into the policy positions and interested in the space. We've got David Johnson who's a great lawyer at Pillsbury, who joined the team, uh who did a lot of the writing and organized the charities. And then my background before getting into the nonprofit sector was I worked with the pharmaceutical industry on alliance development. So partnering with charities when they were trying to say get a therapy covered by Medicare part D um Nonprofits have uh a lot of incentives for the crypto community to be healthy, for prices, to move in a positive direction for a regulatory framework to be trusted, traditional financial institutions to pour money into the space. Nonprofits want to see clarity. There are a lot of that pros who take crypto more than half of the fortune top 100 nonprofits in the US, take crypto at this point. Thousands do all around the world but more want to get into it. And they've got boards who are kind of nervous about the space because of FTX and everything else. And then on the other side, you've got save the Children of the world, right? Nonprofits who have been into crypto since 2013. And they don't like seeing what's happening in the space. So ultimately, it was a bit of a sign on a letter and non profits coming together going to Capitol Hill and saying, um you know, we are also advocates for healthy crypto sector. We're hoping to see in 2024 and beyond more companies in the crypto sector, partnering with charities to go to Capitol Hill and show people on the hill that it's not just about profits, it's about building an ecosystem of value. All right, Pat, we are going to leave it there. Thanks so much for joining us this morning and Happy Giving Tuesday. Yeah, thanks so much. Everyone get out and give. That was the giving block co-founder, Pat Duffy.