Should your charity accept cryptocurrency donations?
Five questions to ask.
Crypto-philanthropy is on the rise, but with little explicit guidance, it can be difficult to assess whether it’s the right thing for your charity. We consider five questions which charities should ask before getting started.
1. What method will you use to accept donations?
A charity might sign up to a crypto-giving platform, such as the Giving Block or Engiven. Typically, these platforms process cryptocurrency donations on a charity’s behalf, converting it to fiat currency before transferring it to the charity. Alternatively, a charity might have its own crypto-wallet, so it holds cryptocurrency itself.
There are merits and drawbacks to each approach. Accepting donations directly means you have more control over the process, but it may be more daunting and requires more technical know-how. Using a giving platform may be a more accessible way of entering the crypto currency world, but there are costs associated with it. Trustees would need to way up whether the costs are likely to be worth it, in terms of the likely number of donations they would attract.
2. What donor due diligence should you do?
Although there is no explicit guidance on due diligence for crypto-donors, the Charity Commission’s guidance on accepting donations is a good starting point. You can find this guidance here. A charity should ensure it has procedures in place to identify and verify the source of any substantial donations and should agree a policy on whether or not to accept anonymous donations. Where a crypto-giving platform is used, a charity should find out what donor due diligence that platform carries out, and what information the charity itself will receive.
3. What information should you give donors?
The Code of Fundraising Practice doesn’t explicitly mention crypto fundraising (although the next iteration of the Code is expected to). However, Section 10 of the Code covers digital fundraising, and many of these same principles will apply to crypto fundraising.
The Code recommends that donors are given certain information at the point of donation. For example, where a third-party fundraising platform is used, potential donors should be informed about any charges levied on their donation. You should also let donors know other key information, for example what will happen to their personal data, what will their donation be used for and the circumstances in which a donation may be refused or refunded. A decent donation policy would cover all these points, with a link to it included wherever you accept cryptocurrency donations.
4. Is the activity in your charity’s best interests?
Many charities may find the idea of cryptocurrencies daunting. However, a case last year of a Scottish animal charity which attracted a cryptocurrency donation of approximately £90,000 means that many charities may be looking at this activity as a potential source of fundraising which they had not previously considered.
Trustees will need to consider all the risks and potential rewards of this activity in the context of their trustee duties and make a reasonable decision about what is in the best interests of their own particular charity. As a reminder, the Charity Commission’s guidance on trustee duties can be found here. If necessary, trustees should take external advice or consider appointing new volunteers or staff members to look after this activity.
5. Do your existing policies and procedures need updating to cover crypto-philanthropy?
Charities should review their existing policies and procedures to assess whether they need to be amended to cover cryptocurrency donations. For example, does your privacy notice adequately cover the processing of a crypto-donor’s personal information? Is your donations policy sufficient for the purposes of accepting cryptocurrency? Are your financial controls adequate to cope with crypto?
Charities looking at this as a form of fundraising will need to weigh up the risks and benefits of accepting cryptocurrencies, before deciding to embark on this new adventure. Our team has experience in advising charities in this area, and we can help you draft or update relevant policies as mentioned in this article. We would be delighted to discuss this with you so please don’t hesitate to get in touch.
You may also be interested in our webinar on this subject, to be held on 30 June 2022. For more information and to book your place, click here.
If you would like to discuss any aspect of this article further, please contact Laura Moss or any other member of the Charities and Social Economy team on 0113 244 6100.
You can also keep up to date by following Wrigleys charities team on Twitter here.
The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.