Crypto-currency fundraising: what you need know
You may have already wondered about raising funds in crypto-currencies without really knowing where to start. It is indeed a technique that is becoming more and more widespread, especially in the United States, but with which very few organisations are yet familiar. Our Director of our Swiss operations, Emilie Compignie, interviewed an expert in the field, David Klajman, Founder of the telemarketing company Fidelis, and recently of CryptoDePhi, an innovative service to accompany associations towards decentralised philanthropy. Here’s what you need to know about crypto-currency fundraising…
We hear a lot about crypto currencies but could you explain in a few words what it is exactly?
The basic definition is as follows: a crypto-currency refers to “virtual digital assets that rely on blockchain technology through a decentralised registry and an encrypted computer protocol”. In other words, crypto-currencies are assets, stored on your computer, allowing their users to make transactions without having to use legal currency (euros, dollars, …).
What are their interests? This is where it gets complicated because the answers are multiple, and I would even say that most of the answers have not yet been imagined. To name a few, I would say:
- to be able to pay almost immediately, even internationally, while it takes 2 to 3 days with traditional currencies;
- to be able to make payments according to specific conditions (e.g.: if France wins its match, then I pay you x);
- to hold a currency that does not depend on someone else, like a government, that can decide to issue new units and thus decrease the value of what I hold.
But the main reason that motivates holders of crypto-currencies: because it is possible that its value will increase rapidly!
In the area of crypto-currency gifts, I would say that we only need to understand that there are many different crypto-currencies, that each one has its own particular interests, but what we just have to note is: more and more people have them! 8% of French people hold crypto-currencies according to a study in early 2022, and this number is growing fast. Some young people use crypto-currencies much more than euros, so it’s going to be natural for them to donate in the currency they use the most.
What are the benefits of raising money in crypto currencies?
The first advantage is that they offer a new way to collect donations. If people prefer to give in crypto rather than euros, why refuse?
It’s well known that the more different ways you offer to donate (Paypal for example), the more donations you get. Crypto donations are an additional way. But I would say that, unlike Paypal for example, people who are going to donate to you in crypto have an additional motivation. They are often very involved in the crypto world, many are activists in their cause, and you will see this when you dive into this universe! They exchange on social networks (Twitter or Discord in particular), and many support causes that are dear to them (ecological, personal data protection, etc.).
The second benefit is that it rejuvenates your donor base, as crypto holders are younger than the traditional donors to our associations.
In France, taxation is a third important advantage with crypto currency donations. Many people have made large amounts of money investing in crypto currencies. Even though the markets have gone down since the beginning of the year, they had gained so much before that all the people who came in before the drop are still benefiting greatly. In fact, if they convert their cryptos into euros, they will have to pay a 30% tax on their capital gain. By giving cryptos directly to an association, they don’t have to pay this tax, and the association doesn’t have to pay it either. So it’s much more advantageous for someone to make a donation in crypto currency, because they receive a tax receipt on their entire donation. And it’s more advantageous for the association as well. The fiscal interest is thus a big asset of the donations in crypto currency.
Is this new fundraising technique accessible to any type of organisation?
There are 2 main obstacles: understanding what crypto currency is, and the technical obstacle.
The technical challenge (creating your wallet, receiving cryptos, converting to euros, tracking your donations, …) is now easy to overcome, either by having someone in-house who knows these subjects well, or by using a platform like ours, CryptoDePhi, which sets up the technique for you.
The obstacle of understanding what a crypto currency is before committing to it, depends on the associations of course. Some decide quickly that it’s worth putting in efforts. For others, the decision is more difficult to take, because there are many preconceived ideas about cryptos (“it is used by traffickers”, “it is not ecological”, …). These preconceived notions need to be looked at closely, they have existed since the creation of crypto currencies and are often carried by competing lobbies, but they are holding back the adoption of this type of donation in some associations.
Since audiences with cryptos are young, you are of course more likely to raise a lot if you are an environmental or social cause than a religious cause. However, when you look at the details of collections in the United States, all causes receive donations in crypto currency. In the US, crypto currency collection this year will exceed $1 billion, which is 5 times its 2021 amount.
The main question to ask yourself is: “Am I ready to make a minimum effort to let people know that I accept crypto currencies?” Make a tweet, write it on your site, talk about it around you…. Some people will donate crypto currencies to you, but for that to happen, they need to be aware that you accept them!
How does your solution for raising funds in crypto-currencies work?
I actually launched the cryptodephi.com solution last May. We did a few months of testing with first associations, and collected our first donations this summer. One of the donations was even 1 Ether, or about 1700 euros.
The way it works is very simple: the association registers on our site to have a demo. If they like the demo, we list it on our site. People can start donating in crypto currency. When a donation is received, CryptoDePhi automatically converts the donation into euros. This avoids the risk of currency fluctuations, these currencies can lose or gain several percentage points per day. Then the euros are automatically sent to the bank account of the association.
The association has access to all the reports, showing them how many people have donated and the details of each donation.
For the communication part, we help the association to let people know that it accepts donations in cryptos, again if people don’t know, they won’t give.
Easy, isn’t it?
If you would like to find out more about crypto-currency fundraising in your region, visit our locations page and find your nearest IFC office…our directors will be delighted to help!
This article first appeared on: https://ec-consulting.ch/