This is Part 2 of a series. Read Part 1 https://hilborn-charityenews.ca/articles/giving-youve-decided-accept-cryptocurrency-donations
There are two ways to approach accepting cryptocurrency donations. You can consider it as another payment option, much like you accept credit card, PayPal, or direct debit. This would be a passive approach. If you are interested in proactively fundraising for cryptocurrency gifts, it involves incorporating it within your fundraising strategy.
Deciding on how you wish to proceed, will influence the route you select for accepting cryptocurrency donations.
Wallets, keys and considerations
To independently accept cryptocurrency donations, there is new terminology and processes you will need to learn. I recommend the book Bitcoin and the Future of Fundraising by Anne Connelly and Jason Shim to help with this.
To get you started, here are some basic considerations.
Your first task will be to seek advice from your auditors. They will have guidelines and regulations that you need to address internally to ensure you follow standard accounting principles.
Once you have addressed all auditor and legal requirements, your journey into the world of cryptocurrency starts with acquiring a wallet. When I suggest acquiring a wallet, I’m not talking about going to your local Nordstroms and picking something in soft brown leather material. To accept cryptocurrency, you need a digital wallet. There are three types of wallets: hardware wallets, soft wallets, and hosted wallets.
Wallets have a public and a private key linked to them. What is a key? It is essentially a unique identifier comprised of alphanumeric characters that identifies a wallet as belonging to your organization. The public key is what you share with a donor who will deposit cryptocurrency into your wallet. Your organization uses a private key to unlock and open the wallet. Think of the private key as a password for your wallet, but with some serious risk if you lose it. There is no retrieving a private key when using a hard or soft wallet. If someone outside your organization acquires your private key, there is no changing or resetting it. A best practice is to immediately convert your cryptocurrency to cash and deposit the cash into your bank account – regardless of which wallet option you decide.
The alphanumeric combination within a public key is very long and randomized. Coupled with the understanding that transactions are permanent and cannot be reversed, the public key is often converted to a QR code to make it easier for a donor to transfer cryptocurrency to your wallet.
In tandem with securing a wallet, you will want to assess and sign up for a cryptocurrency trading platform.There are many to choose from, including several Canadian platforms like Coinberry or Bitvo. At a minimum, review the following factors in your assessment:
Test and document
Once your wallet and platform are set up, it will be important to test everything to ensure it is working smoothly. Testing will be important to understand the user experience. Is an existing donor, volunteer, or employee willing to assist you with testing the process?
During the testing phase, document all the internal steps in a process document. The rate at which you receive cryptocurrency donations will probably be infrequent. Solid documentation will ensure consistency and that no stage in the process is overlooked. Within your process document, include definitions, articulate employee roles and responsibilities, provide screenshots, and share where reports and backup documentation are located.
Each time you learn something new about the process of accepting cryptocurrency donations, include it in the process document. The process document will be invaluable, especially when senior leadership, auditors or board members have questions.
If you are looking to accept cryptocurrency as an alternative payment method, using a platform like CanadaHelps is the best option for the majority of organizations. It’s turnkey with a minimal investment of staff resources and minimal risk.
If you plan to actively fundraise for cryptocurrency donations as part of your fundraising strategy, consider investing the time and effort to set up the internal processes and technology required to accept, monitor, and report cryptocurrency donations. This includes learning the concepts and terminology of cryptocurrency and keeping up-to-date with related changes (which are frequent). With a DIY approach, you have greater control and flexibility, along with the ability to leverage opportunities more quickly.
Overall, what is the potential reward for investing in this form of giving? New major gift donors. Something that every charity appreciates.
Disclaimer: The author does not endorse any of the vendors listed in this article. Organizations should conduct their own due diligence when working with vendors.
Liz Rejman (she/her) has spent 25 years working in the fundraising profession. Liz is a former President of the prospect development association (Apra) and served as a member of the Board of Trustees for the Apra Foundation. She has instructed at Western University on technology in the not-for-profit sector and Georgian College on prospect research. She is the co-editor and contributor to the book "Prospect Research in Canada: An Essential Guide for Researchers and Fundraisers" and contributor to the book “The Vigilant Fundraiser.”