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Growing Popularity of Crypto Could Spur Charitable Giving: Fidelity

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What You Need to Know

  • Forty-five percent of cryptocurrency owners donated $1,000 or more to charity in 2020, vs. 33% of the full investor population.
  • And 88% of millennials consider charitable giving an important part of their lives, vs. 74% of the total population.
  • Donors have given $158 million in cryptocurrency assets to donor-advised funds at Fidelity Charitable this year, up 464% from 2020.

What does the growing awareness and adoption of cryptocurrency among investors portend for charitable giving?

Possibly good news, according to a study released Thursday by Fidelity Charitable.

Forty-five percent of owners of cryptocurrency, such as Ethereum and Bitcoin, donated $1,000 or more to charity in 2020, compared with 33% of the full investor population.

The study suggested that cryptocurrency’s popularity among millennials makes it increasingly likely that this trend is here to stay. Forty-eight percent of millennials said they are knowledgeable about cryptocurrency, compared with just 18% of all investors.

Thirty-five percent of young investors own cryptocurrency, versus 13% of all investors, and among millennials who do not, half say they are likely to consider investing in digital assets in the next year.

Forty-seven percent of millennials also believe that cryptocurrency is a smart investment, compared with only 6% of baby boomers.

Besides their disproportionate interest in cryptocurrency, 88% of millennials said charitable giving is an important part of their lives, compared with 74% of the total population. Similarly, three-quarters of millennials consider themselves philanthropists, versus 45% 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,” Tony Oommen, a Fidelity Charitable vice president, said in a statement. 

Oommen noted that donors have already contributed $158 million in cryptocurrency assets to their donor-advised funds at Fidelity Charitable this year, up 464% 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,” he said.

Artemis Strategy Group conducted the study conducted in July and August among 1,216 investors in the U.S. who have a minimum of $25,000 in investable assets outside of an employer retirement plan.

Working Out the Kinks

The full financial implications of investing in cryptocurrency are not yet widely understood, according to Fidelity Charitable, even among those who have invested. 

Thirty-eight percent of cryptocurrency investors were not aware that selling digital assets is a taxable event. And 55% were not sure whether digital assets can be donated to charity.

Fidelity Charitable noted that donating digital assets to charity is a tax-savvy strategy that can potentially minimize the investor’s tax burden. 

The study found that despite this knowledge gap, one-third of cryptocurrency owners said they have donated digital assets to charity. But challenges still exist in transacting in cryptocurrency. 

Forty-six percent of those who had made crypto donations said it was hard to find charities that accept cryptocurrency donations. Moreover, half said the recipient charity required a larger amount than they wanted to give, and 44% said the process was cumbersome.

“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,” Oommen said. 

He said advisors can help, not only by educating clients on the implications of investing in cryptocurrencies, but also in looking across all assets they hold to determine the most effective way to support their charitable giving.