The following is a conversation between Anne Connelly, Co-author of Bitcoin and the Future of Fundraising: A Beginner’s Guide to Cryptocurrency Donations, and Denver Frederick, the Host of The Business of Giving.
Anne Connelly, Co-author of Bitcoin and the Future of Fundraising
Denver: Fundraisers are well aware that if you don’t ask for the gift, it’s almost certain you’ll never see it. What’s even more certain is that you’ll never see a gift of cryptocurrency if your organization isn’t set up to accept it. And these gifts, well, they can be pretty significant. Further, the technology that enables the existence of cryptocurrency, the Blockchain, has the potential to radically change the way nonprofits operate.
Here to discuss these profound developments, it’s a pleasure to have with us Anne Connelly, the co-author of Bitcoin and the Future of Fundraising: A Beginner’s Guide to Cryptocurrency Donations.
Welcome to The Business of Giving, Anne!
Anne: Thank you very much!
And cryptocurrency is kind of like digital gold, where anybody can participate; anyone can send it to friends and family across borders, around the world, and no government manages its price. The only thing that will change the price for cryptocurrency is demand from other people who want to buy and sell it.
Denver: So, let’s start at the beginning. How do you define cryptocurrency, and how does it work?
Anne: So, cryptocurrency is essentially a digital currency, but one that isn’t created by any one central government or organization. So if you think about something like gold, gold isn’t created by a government. It’s not managed by our government. Anybody can buy and sell it, and it can be used anywhere in the world. And cryptocurrency is kind of like digital gold, where anybody can participate; anyone can send it to friends and family, across borders, around the world, and no government manages its price. The only thing that will change the price for cryptocurrency is demand from other people who want to buy and sell it.
And so, for fundraisers and for people working for nonprofits, the best way to think about it is: it’s just a new asset that you can use to help make your organization better.
Denver: Where would I go to purchase it?
Anne: So you could find cryptocurrencies in a couple of different places. The first place is just from another person. You give them some cash, they give you some crypto. A second place is a bitcoin ATM, which is like a special kind of ATM machine where you can put cash in and get crypto out. But the easiest spot, and the spot most people use is just an online exchange.
So if you imagine, if you’re going on vacation, and you go to the airport and you’re trading US dollars for Mexican pesos or something – it’s just like that but it’s online. You connect your bank, you put some funds into the exchange, and then you trade them for cryptocurrencies, like bitcoin. That’s it. That’s essentially it. It’s not too complex.
Denver: How big is the size of the user base? Or, what’s the estimate at least? And how would you describe that demographic?
Anne: So it’s impossible to know exactly how many people own cryptocurrencies, but I think Cambridge University came out maybe a year or two ago and said… I believe it was over 117 million that they believe it is. And that’s growing. That number is growing significantly every day.
And while the user base of crypto started off as being tech nerds, people who are really excited about new forms of money, it’s grown to include the vast majority of ordinary people. So, there’s people all across Canada, the United States that are using it both to speculate, to see if they can make money, but also to be able to do things like sending money home to family overseas, or to pay bills in different countries.
And so, where we started with this one particular community of users for cryptocurrency, it’s actually broadened quite a bit to include huge proportions of just the general population.
Denver: Well, I should get some because I am the ultimate ordinary person. So, it’s my time, I guess.
Anne: Everyone should have some!
Denver: So if we’re talking about cryptocurrency donations, what are the benefits to making my contribution in cryptocurrency?
Anne: One of the best parts about using cryptocurrency is simply how easy it is to donate.
So let’s say you had an international emergency. Let’s say there was a tsunami in Indonesia like there was maybe 20 years ago. Sending money to Indonesia, if you’re in the United States, would be very difficult. You’d have to be using Western Union. You’d have to be paying fees of 8% to 12%, and the amount of time it might take to get the money there could be two weeks. And in an emergency where you need money right away, that’s not good enough.
Whereas cryptocurrency, you can send to anyone anywhere in the world in a matter of seconds or minutes. And so that’s one of the greatest benefits – is just the ability to send money easily and quickly. Then the same thing would apply to things like if you wanted to send money to a family that was struggling in Syria or Iran, and if there’s sanctions on those countries, you can’t do that. And so, ordinary people will suffer because of the actions of their states or politics of state governments. And so, it’s very critical for people like that to be able to send and receive money.
Denver: Are there any tax benefits by giving via crypto?
Anne: So, that depends on where you’re from. I know in Canada where I’m from, you don’t get the capital gains benefits that you do in the United States. And so, it would really be about checking with your particular jurisdiction. But in the United States, there are certainly tax benefits for donating in and around capital gains.
So, there are some really good benefits. And I think a lot of the early adopters of cryptocurrency who are able to make significant amounts of wealth in a short amount of time are keen to donate in crypto and not exchange it out to local currency because it’s also part of their philosophy and who they are. They want to donate to organizations that also believe in crypto and are willing to accept it.
Denver: I guess here in the United States, it’s considered an in-kind contribution, so there’s a whole lot of benefits that go around by giving in that kind of fashion.
So, another question about estimates. How many charities in the United States and Canada would you guess are now accepting bitcoin and other cryptocurrency donations?
Anne: It’s still a small number, but it’s growing quickly. I did some research in and around how many organizations were accepting it in Canada, and this was about two years ago, and the number is less than 4% of the charities that I surveyed, which was somewhere around 200 charities, I believe.
But what we’re seeing is that the ones that do accept it are having this incredible opportunity to make relationships with the early adopters of crypto and the truly wealthy individuals. So, there’s this beautiful window of opportunity where organizations that are getting involved early are really able to capture this market of donors that — they don’t have anywhere else to give. A lot of the early crypto adopters will google which charities accept crypto and then make their donations based on that, which is crazy.
When you look at the upside potential of starting a crypto donation program, something that could take you less than a week to implement and costs nothing to do, there’s really no reason at all why charities should not have a crypto donation program.
Denver: That’s crazy, you know that? When you think of all the effort that nonprofits put forth to try to make their case and persuade someone, and here you have donors who want to do something good, but they can’t find anybody. So, they go looking to say, “Who will take my money?”
Anne: Yes. It’s crazy! And the gifts are not small. We’re not talking about $20 or $30; we’re talking about $20 million or $30 million with some of these gifts. In fact, there was a donation made about a month ago that was $1 billion in cryptocurrency that went to help the fight against COVID in India.
And so, when you look at the upside potential of starting a crypto donation program, something that could take you less than a week to implement and costs nothing to do, there’s really no reason at all why charities should not have a crypto donation program.
Denver: Less than a week and costs you nothing. So, go a little bit more into that. How does a non-profit get started? What do they need to do?
Anne: So the first thing is education. It’s just really understanding how crypto works, who the crypto donors are, and dispelling a lot of the myths that exist around cryptocurrency. There’s a lot of fear around things like: Is it used for crime? And what’s the impact on the planet from climate change perspective? And a lot of those questions are really just barriers, mental barriers for people where they feel like, “Hey, we can’t move forward because of this,” where the reality is a lot of those myths are simply not true, or much more nuanced than people believe. So, education is absolutely the first step.
And the second step is really just for everyone on your team to buy a dollar’s worth of cryptocurrency. You don’t have to invest your life savings, but just try it out. See what it’s like. And then getting set up is very simple. You can actually work with a third party that will accept the cryptocurrency for you so you never need to touch the crypto. All you get is money in return. But for organizations that want to take it a little bit further and accept the crypto directly, there’s some really incredible opportunities as well to then take the crypto and generate revenue with it in really safe ways.
And so, when you look at things that you might do with the money in your bank account while you’re waiting to spend it, maybe you’ll put it in a really safe investment vehicle. There’s opportunities like that but in the cryptocurrency world as well.
I really encourage charities and organizations to think outside the box around other ways to raise funds, and that’s outside of just fundraising. Look at ways: how can you build revenue, and cryptocurrencies are a great way to do that.
Denver: If you were the CEO of a nonprofit organization and got a good deal of crypto that came in, would you cash out almost all of it in terms of a very conservative investment strategy, or would you keep letting a little bit of it ride and see what happens?
Anne: I would absolutely sit down and think about: Let’s cash out 80%. Perhaps let’s put 10% of it in something that’s a little more medium risk. Maybe we hold on to the cryptocurrency itself. And then let’s use that last 10% to YOLO, and just see what happens. Because the reality is, the risk to reward in this situation – the opportunity is incredible. And I think for organizations that have that potential, they should give it a shot.
I think about– I started a crypto donation program at an organization I worked at in 2013, 2014. And at that point in time, we accepted bitcoin, and bitcoin was worth $130. And today, I think it’s close to $40,000. And I just think had we just kept the money in bitcoin instead of cashing it out, the opportunity of that would have been incredible.
And so I really encourage charities and organizations to think outside the box around other ways to raise funds, and that’s outside of just fundraising. Look at ways: how can you build revenue, and cryptocurrencies are a great way to do that.
Denver: Well, the cryptocurrency market is so volatile, and I know there is a risk involved. But let’s say people followed your advice, you’re getting 90% of it. It’s probably 90% of a gift, that you didn’t even know existed a year or two ago. And that 10%, if that volatility goes in your direction, it could just change the face of your organization and what you’re able to do to fulfill your mission.
Well, you talked about the billion dollars in India, but let’s talk about some more normal examples. I have one of the co-founders of She’s the First, coming up on the show here in a couple of weeks, and I know you included this in your book, but they raised $42,000 after eight weeks. Tell us a few more of those kinds of stories about what some organizations have been able to do by accepting cryptocurrency donations.
Anne: Absolutely. There’s one organization called BitGive, and they are more crypto-specific, but they’ve been able to work on projects around water, and sanitation, and poverty all around the world because not only are they accepting crypto gifts, but they’re able to send money easily overseas as a result of that, which is incredible.
One of my favorite organizations, I think, that’s working in this space is– it’s run by Fereshteh Forough, who’s an incredible entrepreneur out of Afghanistan, and she’s created Code to Inspire.
Denver: Code to Inspire. She’s been on the program.
Anne: OK. Excellent. She created a wonderful program that teaches women how to code in Afghanistan, and they get paid in cryptocurrency, which if you’re a woman in a lot of countries around the world, you can’t have a bank account without the permission of a male relative. And cryptocurrency enables these women to have a bit of freedom and to get access to an international job market they wouldn’t otherwise have access to, which is incredible.
Denver: Yes. Just a great way to circumvent a lot of the traditional strictures that have kept people sort of stuck in place.
We all know, Anne, the impact that a matching gift program can have when you’re trying to raise donations. But with crypto, you can have automated matching, right?
Anne: That’s right. And you can have essentially smart contracts, or sort of automated systems, where if a donation is made, then automatic matching gift is made. But there’s also some really cool stuff happening in around something called the “quadratic fundraising.” And this is what gets me really excited. This is the bleeding edge of fundraising.
And essentially, if you think about it, if you had a matching gift program and let’s say there were two different projects that donors could give to, if a hundred people gave $1 to the first project, and one person gave $100 to the second project, they get the same amount of matching, which doesn’t really represent the will of the donors and how many people believe in and back a particular project.
And so, quadratic funding essentially will give more funds, more matching funds, to projects that have a greater number of donations, even if that number is smaller. And so it really enables the voice of the people to come forward more, in a way that traditional matching donations can benefit the rich more than people who are really interested or dedicated to a particular project.
Denver: Maybe we should think of some kind of a derivation of that for our electoral process, and see if it works.
Anne: They’re using it in government. They are using it in government, in a way, more around quadratic voting. But in the government of Colorado, it’s something that they’re doing, which is very exciting.
Denver: Anne, there are four main categories of crypto assets. Why don’t you describe them and tell what they can tell the fundraiser about the philosophy behind the donor who has purchased a particular one?
Anne: I think one of the most common misconceptions about crypto donors is they’re all the same. And really there’s– while they all have some shared roots, a lot of cryptocurrency individuals come from a bit of a libertarian background. They’re quite different when you start to break them down.
And so, when you look at Bitcoin maximalists who are very big fans of Bitcoin, they don’t believe very much in any other tokens that are out there. They can be very libertarian, very strong about personal freedom, anti-government. But people often confuse them with being very right-wing because often, they like the freedom to have guns, that type of thing, but in reality, they’re very pro-personal freedom. So you want to have gay marriage – Great! Go for it. They love that. Anything like that. And so, they are very big on organizations that are doing things like helping people living under authoritarian governments. They’re big on freedom. They’re big on technology.
And then you can look at say, more decentralist people that are behind organizations and cryptocurrencies like Ethereum. And these are the types of blockchains where people are building really interesting applications for society to help make it more fair and more open. And these types of donors are more interested in: How can we actually change the models of society so that they are better? So they’re interested in organizations that are innovative, and novel, and doing things in a different way. They want to achieve the same outcomes as many organizations, but they’re doing it in a way that’s a little more forward-thinking and maybe more exponential.
When you look at cryptocurrency donors, they share a lot in common with the philosophy of people working in nonprofits. They want to see change. They want to see the world be a better place. They want to see more access for people who are currently excluded. It’s just a different way of going about doing it.
Denver: Yes. It sounds a little bit more like systems change as opposed to just doing a single organization. They want to really tackle the issue on a broad basis.
Anne: Yes. And they’re tackling it in sort of a 10X way as opposed to 10% way, and that’s what’s really exciting about these people. But I think in general, when you look at cryptocurrency donors, they share a lot in common with the philosophy of people working in nonprofits. They want to see change. They want to see the world be a better place. They want to see more access for people who are currently excluded. It’s just a different way of going about doing it.
Denver: Are crypto donations popping up in galas?
Anne: To be honest, I haven’t seen a gala for a long time because of COVID.
But the beauty of crypto donations is because you can make them by simply scanning a QR code. They can be integrated into everything that you do. So you could have them, as you say, on a screen at a gala, in a brochure. You could see them on the coupon of your direct marketing piece. You could have them on your website.
And that’s what’s so great about it, is you may have a whole cadre of cryptocurrency donors in your database already that you just don’t know about because they haven’t identified themselves. And so, that’s where there’s some pretty incredible potential to even tap into your existing donor base to see who might be able to give in a more significant way because they could do it in crypto.
Denver: Cool. And it also sounds like it’s pretty important to integrate it into everything that you’re doing. Just not have it off to the side, but have it in your direct mail, have it in everything so those people can see it, and you make it easy and accessible for them.
Anne: Absolutely.
Denver: Let’s go to the other side of the ball for a minute, and that’s crypto and operations. And if I recall correctly, Anne, this is really where you cut your teeth, which was paying people and paying bills and things of that sort. Share with us that experience.
Anne: I initially got my start in my career working for Doctors Without Borders, and one of my first jobs was working in the Central African Republic on a pediatric malnutrition program. And we were in a tiny village in the middle of the jungle, and we had an incredible team of local nurses and doctors that were working with us, but everyone was unbanked. And so, to be able to pay them, our entire operation worked in cash.
And so, I used to carry knapsacks full of money through military checkpoints and war zones to be able to do the work that was so important. And so, when I learned about Bitcoin, for me, it was such a critical technology for not only ensuring the safety of workers like myself overseas, but also to give the people that I was working with, all of our employees, more options as well and connecting them to a financial system that was functional for them.
And so, that was really where I got my start. And the more I dug into cryptocurrencies, but also the technology behind them called blockchain, the more I realized how transformative it was going to be for particularly developing economies, but really for people all around the world.
Denver: Let me pick up on what you just said, that is Blockchain. Tell us about it.
Anne: So blockchain is just a technology. It’s a word for technology that’s essentially a ledger. So if you imagine every financial transaction that happens around the world every day between people and banks and corporations, if all of those transactions were stored in one record, that’s essentially a blockchain. Except there’s a copy of that record, a copy of that chain stored on thousands of computers all over the world. This meaning: it’s decentralized, essentially. And so, what that means is that if someone wanted to hack into that record and change one of the transactions, they’d have to do it on thousands of computers at exactly the same time, making it virtually impossible.
And so, what it enables us to do is to make transactions but not need a central party in the middle who’s managing that, that could be corrupt, or could be hacked, or could be just a bad manager of the system. And so, that’s enabled us to, essentially, change the way we structure society to move away from needing groups like corporations or governments or banks from helping us with transactions of all types, to being able to do it in a peer-to-peer fashion, which is very exciting.
Denver: And talking about one of those intermediaries, nonprofit organizations, one of the challenges they always face is the transparency of their operations and their accountability. How can this system address that really effectively?
Anne: So if you imagine as a donor, you don’t really have any guarantee that your money has gone to where you think it has. So if you made a donation to a local charity, you assume that the money got overseas to build a school or a well, but you don’t really know. And cryptocurrencies are inherently completely traceable, which is really interesting.
So as a donor, you could donate your bitcoin to an organization, and then they would be able to identify the different wallets where – “OK. This is our wallet at the organization. We’re going to send it to this organization in Kenya or Uganda… that’s going to actually implement the work.” And you can watch the money move from place to place so that you know it’s actually arrived where it’s supposed to, which is very exciting.
And then for organizations, there’s also opportunities simply for efficiency and improved operations. So for example, the World Food Program has a project called Building Blocks, and they’ve been using cryptocurrencies in refugee camps as a way to essentially send cash transfers to the people living there so that they can buy the food that they need at local stores.
And this is great because, instead of just giving them beans and rice, or whatever food will fill their stomachs, they can actually go and shop for the food that they want, which helps build up local infrastructure in the food system space. And then it also enables them to reduce the cost of doing a cash transfer program where they’d have to be sending 100,000 people different cash transfers, which would be very expensive. So they’re saving several million dollars every year on this project just by using cryptocurrencies.
Denver: So where would you say we are on that arc? And I’m really now talking about developmental and humanitarian organizations working in the international arena in the developing world. Has there been a wide acceptance of this? And where do you see it sort of going here in the next 5 or 10 years?
Anne: There are certainly some incredible early adopters of this technology. UNICEF, in particular, is one I’d like to highlight because they’ve been in the space for many years now, and they’re not just doing it at a basic level. They have a whole cryptocurrency fund. They’re working with blockchain development organizations in emerging economies to help them grow in scale, which is exciting. They had a project in South Africa that would track primary school attendance using blockchain and autopay teachers that were supporting these underserved groups.
But many other organizations are getting on board. We’ve seen Save the Children has been working with it, and many others. And I think what we’re starting to see is more organizations dipping their toe in the water by having donation programs. And then once they do that, and the comfort level around the technology grows, then we start to see them getting more involved in the more exciting and more impactful applications of blockchain, where it might roll into their operations or into other revenue streams.
Denver: How is this going to change the role of nonprofits? A big thing that nonprofits do obviously is provide trust to-and-between the donor and the beneficiary. Seems to me that a lot of that can be addressed and perhaps more effectively by this technology. So then, you’ll always begin to say, “OK. What about those people at nonprofits?” What is going to be their role in the future?
Anne: That’s the ultimate goal of a nonprofit, is to work its way, work itself out of the system to create a world where the beneficiaries don’t need it anymore, fundamentally. And that will start to happen with the ability to send money overseas more easily, with the ability to trust the data in a blockchain, as opposed to having to trust an intermediary, like an organization.
We will see at least a decline in the need for nonprofits over time, but also an improvement in the nonprofits that we have because they’ll work more efficiently. They’ll be able to help more people or more animals. And that’s a great thing for everyone.
Denver: We’re talking about this in the context of international aid organizations. Do you see an application here, for locally-based… whether it be in Canada or whether it be in the United States? How can blockchain be used there on that operational side beyond donations?
And if you were–again, I’m going to make you a CEO again of a nonprofit organization here in North America– if you were starting one up, how would you use blockchain in the context of what we’ve just been talking about to make your organization more effective?
Anne: Absolutely. Local charities are also working with cryptocurrency. There’s a great one called Us for Warriors that’s supporting veterans with their program. The reality is blockchain is going to disrupt every industry. Any application where you’re using the internet is kind of where you can use blockchain to disrupt.
So there’s groups that are using blockchain to make sure their supply chains aren’t using any slaves in it, or they’re fishing in sustainable ways for the climate. And that’s beautiful because we’re starting to see every industry adopt this to just generally be better overall. And so, if we can start to trace this at its roots, then you’re not going to need nonprofits that are overseeing it in the same way as we do today.
And so, if I were a CEO of a nonprofit in today’s world, I would really look at blockchain first – How can we implement this right from the start to create systems that essentially will create the transparency that we want and donors want and the world needs, to essentially ensure that what we’re doing and the services we are providing are the best they can be right from the start?
Denver: One other piece of that transparency, maybe you have a thought on this, is measuring impact… because that is very elusive. How can the blockchain help that process?
Anne: There’s been some incredible projects out there that are tracking impact. I was talking to one the other day that works in the film industry, and they essentially used blockchain to be able to demonstrate to funders how each film they’ve invested in is supporting ESG. So where they’re looking at diversity within that film, diversity within the viewers of the film – Was it done in a climate-friendly way? And all of that is tracked on blockchain, so that they know that the data is high-quality data, and that it’s much easier to analyze based on that.
And so, it’s really enabling us to see the impact of our work in a brand-new way, which is so important as we move into a space where there’s an abundance of data, and we need to figure out what matters, what doesn’t, how do we track it, and how can we show that to our funders and donors.
Denver: Who are some of these blockchain companies? Because many of them are pretty darn generous, aren’t they?
Anne: Yes. There’s a number of very incredibly generous corporations out there in the crypto space. Coinbase has made some great donations. They have a foundation. Binance has done some multi-million-dollar gifts.
But it’s not just the corporations. It’s really– it’s the community itself and the people behind it that fundamentally believe in sharing the wealth that they’ve created and making a world that is better than the world we have today, and being a significant part in creating that change.
Denver: Let me close with this, Anne. And I know you don’t have a crystal ball, but what would your guess or your projections be for the significance of cryptocurrency in the coming years, the next 5 or 10 years, as a piece of the philanthropic pie?
Anne: So Bitcoin is, by far, the best performing asset of the past 10 years, like thousands of multiples above the stock market, above gold, above silver. So if you look at it simply from a financial perspective, the potential form of philanthropy perspective and funding different organizations and their work is almost immeasurable. We’ve got a lot of individuals who’ve made a lot of money in a short amount of time – they don’t need it. They don’t care for it. They care for the change. And understanding that about your donors is really important.
But more than that, I think this technology is actually going to enable nonprofits to achieve what they want to achieve in a way that’s never been possible before. And that’s what gets me so excited about this, is really the potential impact that we can have as technologists, as nonprofit operators, as donors, and what that’s going to enable us to do in our lifetimes. And that’s what gets me really thrilled about this technology and why I want to share it and its benefits with everyone I can.
Denver: Well, that’s what you’re doing. It is certainly an exciting time. The book again is Bitcoin and the Future of Fundraising: A Beginner’s Guide to Cryptocurrency Donations. Read it, and you’ll feel 100% confident to talk to your boss or CEO about getting them on board with crypto.
Thanks so much for being here today, Anne. It was such a pleasure to have you on the show.
Anne: Thank you so much.
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