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Are bitcoin donations in your future?

Published:  06/12/2014

Originally published in the June 12, 2014 AHP Connect

Few fundraisers lose sleep over the payment system donors use to make contributions. Most gifts and pledges are made in dollars, euros, pounds, yen and other types of sturdy legal tender. Donations of stock, works of art or other forms of private or real property also are gratefully accepted, and they routinely are assigned monetary value through appraisal and assessment. Certainly, for purposes of tax-deductibility, the value of donations must be expressed in monetary terms.

But now we are in an era of digital philanthropy and cryptocurrencies—chief among them the bitcoin, which has been on the scene since 2009. Often called virtual currencies, they are products of the Internet—where they are created, stored and traded for goods and services. No government backs bitcoins and some early adopters tarnished their reputation by using them for illegal purposes. Now, however, they are recognized as a convertible currency by the U.S. government and they circulate online in legitimate markets worth many millions of dollars.1

So, is there—should there be—a place in health care philanthropy for bitcoin donations? Or are they too risky?

Volatile value

Writing for the Canadian law firm Drache Aptowitzer LLP, Brent Randall notes that bitcoin “is an unregulated currency that is valued based on what its holders are willing to accept in exchange. The currency transfers directly, via Internet, between two parties—no banks are involved. This, in turn, means the value of Bitcoin can be volatile.”2

For fundraisers, bitcoin’s roller-coaster volatility is a disturbing trait. According to the Bitcoin Index (BCI) published by CoinDesk, the U.S. dollar value of a single bitcoin jumped from $360 on April 10, 2014, to $590 on May 27, 2014—an increase of 64 percent! And it had been valued at more than $900 in January 2014.3

A cautious approach to stewardship in dealing with these ups and downs would strongly suggest immediately converting bitcoin donations into dollars. But that raises a fundamental question: Who would be inclined to donate bitcoins to a health care institution in the first place?

Who gives using bitcoin?

The beginning of an answer is suggested by technology journalist Steven Melendez. He notes bitcoin’s “technolibertarian roots” and sees bitcoin users as hi-tech individuals with a libertarian bent—eschewing involvement with governments and corporations. As examples of bitcoin-

supported philanthropy, he points to the BitGive Foundation (whose bitcoins help to fund people-to-people environmental efforts and health causes in developing counties) and to nonprofits like Fr33 Aid that provide medical supplies and aid to third-world areas (using bitcoins to bypass high money transfer fees and unstable banks).4

Based on this admittedly rough profile, chances are slim that members of the bitcoin community will follow traditional steps up the philanthropic pyramid. Few bitcoins are likely to find their way into a campaign to build a new hospital annex, much less to pay for gala tickets or a golf tourney. Current users of the currency are not prone to respond to such appeals.

Community service programs sponsored or co-sponsored by hospitals and health care systems would seem more likely to attract bitcoin donors, especially initiatives undertaken in partnership with local nonprofit groups to benefit disadvantaged individuals and families. Such programs may range from neighborhood clinics, to outreach education aimed at combating obesity or teen pregnancy, to free diagnostic programs such as audiology and mammogram screenings.

Social media are the most likely channels through which the bitcoin community may embrace these philanthropic opportunities. But first, development offices must be sufficiently tech-savvy to accept virtual currency donations and to put them to good use. In addition, gauging ROI can be problematic.

As digital philanthropy continues to grow in the health care arena, we will have to wait and see whether bitcoin finds a significant niche.

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1 Richard Satran, “How did bitcoin become a real currency?,” US News, May 15, 2013, accessed May 28, 2014. In its March 2014 Notice 2014-21, the IRS stated, “For tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.”

2 Brent Randall, “Virtual currencies: Implications for charities,” Drache Aptowitzer, April 20, 2014, accessed May 28, 2014.
3 Garrick Hileman, “Why bitcoin’s price has leapt 65% since April,” CoinDesk, May 28, 2014, accessed May 28, 2014.
4 Steven Melendez, “How nonprofits are cashing in on the cryptocurrency boom,” Motherboard, May 9, 2014, accessed May 28, 2014.

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