Growing Popularity of Cryptocurrency Could Fuel Charitable Giving

Nearly half of cryptocurrency owners donated $1,000 or more to charity in 2020, compared to one-third of all investors

Millennials express elevated interest in both charitable giving and cryptocurrency investing

Watch out: Crypto tax implications and donations of digital assets poorly understood

The rising awareness and adoption of cryptocurrency among investors could be good news for charitable giving. According to a study by Fidelity Charitable®, owners of cryptocurrency such as Bitcoin or Ethereum are a disproportionately more charitable group. Forty-five percent of cryptocurrency investors donated $1,000 or more to charity in 2020, compared to 33 percent of the full investor population.

Cryptocurrency’s popularity among Millennials makes it increasingly likely that this trend is here to stay. Millennials are more knowledgeable about cryptocurrency and more likely to have invested than older generations—and they are far more confident in the long-term outlook for digital assets.

• Nearly half of Millennials (48 percent) say they are knowledgeable about cryptocurrency, compared to 18 percent of all investors.
• More than one-in-three young investors (35 percent) currently own cryptocurrency, compared to 13 percent of all investors. Among Millennials who do not, half say they are likely to consider investing in digital assets in the next year.
• Nearly half of Millennials believe cryptocurrency is a smart investment, compared to only six percent of Baby Boomers.

In addition to their disproportionate interest in cryptocurrency, Millennials are also a charitably inclined generation. Nearly nine-in-ten Millennials say charitable giving is an important part of their lives, compared to 74 percent of the total population. Similarly, three-quarters of Millennials consider themselves philanthropists, compared to only 45 percent of the total population.

“As investors—particularly Millennials—combine their interest in digital currency with their charitable values, digital assets have the potential to become a significant source of funding for philanthropy,” said Tony Oommen of Fidelity Charitable®. “Donors have already contributed $158 million in cryptocurrency assets to their donor-advised funds at Fidelity Charitable this year, a 464 percent increase from 2020. This offers advantages both for the donors, who can minimize their capital gains tax owed, and for nonprofits, who will be the beneficiaries of larger gifts and who often have a hard time accepting these assets directly.”

Though its popularity is on the rise, the full financial implications of investing in cryptocurrency are not yet widely understood—even among those who have invested. More than one-in-three cryptocurrency investors (38 percent) are not aware that selling digital assets is a taxable event. Similarly, there is significant confusion about donating these assets to charity—a tax-savvy strategy that can potentially minimize the investor’s tax burden. More than half (55 percent) are not sure that digital assets can be donated to charity.

Despite this knowledge gap, many cryptocurrency owners are beginning to explore using these assets for charitable purposes, with one-third of cryptocurrency owners saying they have donated digital assets to charity. Reflecting the challenges that still exist in transacting in cryptocurrency, many of those who donated found the process challenging. Nearly half (46 percent) of those who made crypto donations say it was difficult to find charities that accept cryptocurrency donations. A similar number, 50 percent, say the charity required a larger amount than they wanted to give, and 44 percent say it was a cumbersome process.

“As the cryptocurrency market expands and matures, we would expect to see that many of the transactional processes that investors find clunky or difficult today become smoother, including the ability to donate these assets for charitable purposes,” said Oommen. “There is a tremendous role advisors can play here in not only educating clients on the implications of investing in cryptocurrencies, but in helping them look across all assets they hold to determine the most effective way to support their charitable giving.”

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