HomeWord is now accepting donations via cryptocurrency such as Bitcoin and Ethereum.
Understanding Cryptocurrency and Donations
What is Cryptocurrency?
Cryptocurrency, often referred to as “crypto” or virtual currency, is a digital asset designed to serve as an alternative to traditional fiat currencies like the US Dollar. It operates on a decentralized system called blockchain, which acts as a public, distributed ledger to verify transactions between parties. While Bitcoin is the most well-known cryptocurrency, numerous other digital currencies exist in the market today.
The Engiven Platform
Engiven is a third-party donation software platform that enables nonprofits to securely accept and process cryptocurrency donations. The platform facilitates the conversion of these digital assets into usable fiat currency, such as US dollars, for the benefit of the receiving organizations. Learn more about Engiven here.
Legal Status of Cryptocurrency Donations
HomeWord can legally accept cryptocurrency donations. In March 2014, the Internal Revenue Service (IRS) classified Bitcoin and other cryptocurrencies as property for tax purposes (IRS Notice 2014-21), making it lawful for nonprofits to receive such contributions.
Tax Implications of Cryptocurrency Donations
For federal tax purposes, cryptocurrency donations must be reported in US dollars. Donors are required to determine the fair market value of the virtual currency in US dollars at the time of donation. This value is typically established by converting the cryptocurrency to US dollars using a reasonable and consistent method based on market supply and demand. Donors contributing cryptocurrency to HomeWord will receive an electronic donation receipt in US dollars through the Engiven platform, detailing each transaction.
Safety and Security of Cryptocurrency Donations
While all electronic transactions carry some level of risk, Engiven has implemented several safeguards to ensure the security of cryptocurrency donations:
- Know Your Customer (KYC) and Anti-Money Laundering (AML) screening for both donors and nonprofits.
- Secure transaction protocols that can potentially offer greater security than some traditional payment methods.
It’s crucial for donors to protect their wallet’s private keys and never share them during the donation process. By utilizing these measures and the Engiven platform, HomeWord aims to provide a secure and efficient method for accepting cryptocurrency donations.