Crypto philanthropy — in which donors contribute gifts of virtual assets such as bitcoin to nonprofits and other beneficiaries — is a fairly recent trend, especially in higher education.
But that trend is already impacting one Buffalo university and other institutions across the country. Some have already implemented ways to accept virtual assets; others are still weighing their options.
The University at Buffalo Foundation Inc., the independent nonprofit that processes philanthropic donations to UB, is working on a project to allow the school to accept forms of cryptocurrency, according to Stacy Knapper, foundation CEO.
“We expect this to be an attractive option now and into the future for donors because of the ease in making this kind of contribution to UB,” she said in a prepared statement to Business First. “As part of our commitment to donor transparency, we will be creating a set of website tools that enable donors to perform these transactions as well as educating our donors and our advancement staff on how these kinds of gifts can benefit both UB and our donors.”
The foundation will partner with third-party vendor BitPay to accept and sell cryptocurrency on UB’s behalf. The project is expected to be completed by the end of the calendar year.
Still, crypto philanthropy is still a young trend in Buffalo, as well as nationally. In 2014, Blockchain CEO Nicolas Cary gave his alma mater, the University of Puget Sound in Tacoma, Washington, a gift of 14.5 bitcoins, valued at $10,000 at the time. It was reported as the first cryptocurrency gift to a U.S. higher education institution. Crypto philanthropy has since spread to institutions like San Diego State University and the University of Pennsylvania’s Wharton School of Business.
A handful of other local colleges and universities that Business First reached out to for this story said they had not yet had donors inquire about crypto currency gifts.
D’Youville University did say while it has not gotten any such inquiries yet, it is working to be prepared for it.
One key reason more colleges and universities are hesitant about accepting such donations is the broader market’s volatility. Especially within the past year, the value of crypto assets dipped and dipped again, sparking big sell-offs, losses for companies that bought in and more skepticism among financial institutions, said Ed Moya, senior market analyst at New York-based exchange firm OANDA.
Virginia Tech, in the Greater Washington area, was also among the first group of U.S. institutions to receive cryptocurrency donations, starting in 2014. It’s since received more than $650,000 in gifts of cryptocurrencies, according to John Cusimano, university treasurer and associate vice president of the Virginia Tech Foundation.
But to limit its risk, the school, which also uses BitPay as its crypto custodian, immediately converts the crypto to dollars.
“As a general policy, the foundation liquidates all gifts upon receipt,” Cusimano said in an emailed statement. “As a result, we are not holding any cryptocurrencies as an ongoing investment or for any other use.”
Unlike Virginia Tech, other institutions may favor the riskier route: holding on to the donation as an investment in hopes the market will stabilize and the value will increase, said Joe Guagliardo, a partner at global law firm Dentons who co-leads its blockchain and digital assets practice. Holding on to the crypto in currency form requires an institution to have the knowledge of managing a cryptocurrency wallet — or engaging help from a crypto custodian, such as The Giving Block or NYDIG.
Accepting crypto donations also requires disclosure, Guagliardo pointed out, as well as the infrastructure for a foundation to navigate the peer-to-peer transfer of funds, including how to verify the source of the donation if the donor is anonymous. There are also regulatory challenges, including whether a gift in cryptocurrency is a commodity or security, and where that shows up on the balance sheet, Guagliardo said,
But for donors, there could be tax benefits involved. The IRS classifies cryptocurrency as a form of property, meaning a donor may still get to claim a deduction for the gift and may not have to pay capital gains taxes, according to a report in Inside Higher Ed.
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