The stablecoin is an essential part of the crypto ecosystem, a favorite asset of cryptocurrency donors, and a hot topic of conversation in philanthropy. So what do nonprofits need to know about stablecoins?
First, you need to understand what the buzz is all about. In 2022, the USDC stablecoin became the most-donated cryptocurrency on The Giving Block’s platform, beating out Ethereum and Bitcoin. Beyond charitable donations, some even predict that stablecoins can revolutionize the way nonprofits provide aid to communities in need.
Stay on the cutting edge of fundraising trends with this primer on stablecoins, their role in the crypto landscape, and the impact of stablecoin donations on causes around the world.
1. What is a Stablecoin?
A stablecoin is a type of cryptocurrency that is pegged to the value of another asset of monetary value, such as the U.S. dollar or the fair market value of gold. Using the U.S. dollar as an example, a stablecoin issuer is typically required to hold the U.S. dollar equivalent for each stablecoin in circulation, often in a combination of cash or U.S. Treasury bonds.
Popular stablecoins such as USDC, USDT, BUSD, and Dai can be purchased from most leading cryptocurrency exchanges.
2. What are the Benefits of Stablecoins?
Unlike other cryptocurrencies, stablecoins are not held because of their potential to greatly appreciate in value. Stablecoins are seen by many as a hedge against market volatility due to their perceived stability. They are also valued for their utility in financial transactions.
In other words, stablecoins provide access to the blockchain ecosystem paired with some of the reliability of a government-issued currency (aka “fiat”).
3. Who Donates Stablecoins to Charity (and Why)?
In recent years, a growing number of cryptocurrency donors have donated stablecoins to nonprofit organizations.
In 2022, more than $22 million in USDC was donated to nonprofits fundraising crypto on The Giving Block, making it the most popular cryptocurrency for donors to give on the platform.
But wait, you might be asking, why do some crypto donors give stablecoins like USDC? Aren’t crypto users only giving in order to receive the tax benefits that come with donating appreciated assets to charity?
Crypto donors are highly motivated to give, and it’s true, tax incentives certainly play a role.
But their generosity is also linked to their passion for the causes they support, such as aid to Ukraine, and their sincere belief that crypto can play a greater role in bettering society.
What’s more, timing is important when it comes to crypto (and crypto philanthropy). Many stablecoin donors hold other crypto assets, but may not wish to donate those assets during bear market-like conditions, when the value of assets in their portfolios may be diminished.
TIP: Nonprofits eager to steward young donors with a high giving potential should spend time learning about the motivations of this emerging cryptocurrency donor demographic.
4. What Can Nonprofits Do With Stablecoin Donations?
No matter your nonprofit’s mission or impact area, a stablecoin donation can be treated just like any other charitable gift.
When accepting cryptocurrency donations, nonprofits have two options. First, they can hold a crypto donation as an investment, similar to what’s possible with a stock donation. Alternatively, they can sell it for its fair market value in cash, which can then be used in numerous ways.
Here are a few notable stablecoin donations that have benefitted nonprofits and other charitable organizations:
- A $9.4 Million stablecoin donation to the University of Maryland to fund medical research to prevent future pandemics
- Another donation of $160,000 was shared among several nonprofits supporting blockchain education
- Yet another $250,000 stablecoin donation supported nonprofits providing humanitarian aid to the people of Ukraine
We have the technology to prevent airborne spread of respiratory diseases. But if we are going to use these technologies to control the next pandemic, we must invest in it now, before it starts. This generous gift…is going to help us lay the groundwork to make that happen.
Crypto donations in the form of stablecoins, like any other charitable donation, can provide a lifeline to nonprofits seeking to meet their revenue goals. The key difference is that nonprofits need to set up a method for securely accepting these donations, and a strategy effectively stewarding crypto donors.
5. Can Stablecoins Revolutionize How Nonprofits Distribute Monetary Aid?
For nonprofits, the stablecoin can be much more than just a form of donation. Stablecoins have the potential to change how charitable organizations can distribute and track monetary aid under difficult circumstances.
Crypto-based aid is already taking root among some of the biggest charitable organizations on the planet. For example, the United Nations recently sent stablecoins to Ukrainian refugees who were displaced by conflict.
The UN’s model could have “massive implications for how government actors and NGOs alike act as a safety net for society’s most vulnerable,” experts told Blockworks.
Crypto enthusiasts have argued for the potential of Bitcoin as a tool to protect human rights for years. Now, with the nonprofit sector perhaps at a tipping point for crypto adoption, it’s exciting to see charities putting these ideas into action.
Take the First Step Toward Accepting Stablecoins and Other Crypto Donations
Crypto fundraising is a proven way for nonprofits to increase major gifts or acquire new donors. Thousands of nonprofits rely on The Giving Block as their trusted crypto and stock solution. Schedule a free demo with an expert at The Giving Block to learn more about achieving your desired fundraising outcomes by accepting cryptocurrency donations.