Is Your Nonprofit Organization Ready for Cryptocurrency?

I was sitting in a finance committee meeting the other day and one of the committee members questioned whether the organization has considered accepting donations in the form of crypto, or investing in crypto.

It’s a great topic that many organizations are actively considering. As we know, there are changes taking place with investing and the use of cryptocurrency is here to stay.

As nonprofits consider including cryptocurrency within the organization, they are likely to accumulate a long list of pros and cons.

Some of the pros include:

• Low transaction costs and quick settlement time.
• Opens up another group of donors.
• Allows existing donors to increase gifts.
• Significant returns.

Cons include:

• Generally, these types of funds are not insurable.
• Difficulty finding the true source of a gift.
• Receipt of cryptocurrency could increase the risk of being hacking.
• Laws surrounding cryptocurrency are still not consistent in all jurisdictions.

Beyond whether a nonprofit should accept cryptocurrency, it’s also important to think about whether to invest a portion of the nonprofit’s portfolio in cryptocurrency. Investing in cryptocurrency does have risks, all of which have to be considered. Here are some steps to take before deciding to invest a nonprofit organization’s assets into the cryptocurrency market:

• Review current investment policy and revise as needed to incorporate this change in investment strategy.
• Review and update your organization’s gift acceptance policy for cryptocurrency.
• Review policy on selling donated financial assets right away. Consider addressing this in the policy as it relates to stocks and cryptocurrency.
• Consult your organization’s investment advisor to see what options are available in the market. There are some conservative crypto options out there that should be reviewed.
• Consider the organization’s investment risk policy.
• Consider how committed the organization is in looking to diversify into this type of investment vehicle.
• Consider how this change lines up with the UPMIFA rules.

The utilization of cryptocurrency is definitely something for nonprofit organizations to consider and discuss within the management team and at the board level. The teams should determine if this is something the organization can benefit from and what the next steps should be in terms of reviewing current policies to ensure you can make an informed decision.