How To Accept Cryptocurrency Donations For Churches

Estimated reading time: 7 minutes

Crypto and Bitcoin are terms that a lot of people simply don’t understand. This new currency has been introduced into our society without a lot of explanation.

I, for one, have an elementary understanding of this new form of currency.

However, I have had more than a handful of readers ask about Crypto and how it can be used in a church.

I wanted to help my readers, so I solicited help from my son Bob, the founder of Seedtime.

He’s a money guy, and I thought he would be the perfect person to help us grasp this new currency and learn how to accept it in our churches.

Crypto and Bitcoin 101

If you are one of the many who are absolutely clueless about all this crypto stuff, I recommend you listen to this podcast below. It is 22 minutes long, and if you listen on 2x speed, you can get it down to 11 minutes.

I promise it will be REALLY helpful to you.

But if you got the basics and want to get on to how this all applies to your church and donations, then let’s continue.

As cryptocurrencies gain mainstream acceptance, more and more churches in the United States are considering accepting digital assets as a form of donation.

This guide aims to answer the most common questions church leaders have about cryptocurrency donations, including legality, security, tax reporting, benefits, risks, and how to educate their members.

Is it legal for churches in the United States to accept cryptocurrency donations?

Yes, it is legal for churches in the United States to accept cryptocurrency donations. The Internal Revenue Service (IRS) treats cryptocurrency as property for tax purposes, similar to stocks or real estate.

Churches can accept cryptocurrency donations just as they would accept other forms of property, such as vehicles or artwork.

However, church leaders should consult with legal and tax professionals to ensure they comply with all applicable federal and state regulations.

Some states may have specific requirements for accepting and reporting cryptocurrency donations.

How can churches securely accept cryptocurrency donations?

To securely accept and manage cryptocurrency donations, churches should follow these best practices:

1. Use a reputable cryptocurrency wallet.

I have personally used 5-6 wallets/crypto exchanges and Coinbase would be my recommendation as the simplest choice as well as one of the most reputable in the space.

Besides that, using a hardware wallets, such as Ledger or Trezor, are a bit more complicated, but offer the highest level of security by storing digital assets offline.

If you decide to use Coinbase, here is a quick tutorial on how to receive crypto with Coinbase:

2. Provide clear donation instructions:

Churches should create a dedicated page on their website with step-by-step instructions on how to make a cryptocurrency donation.

This should include the church’s cryptocurrency wallet address and any necessary disclaimers.

Another video from Coinbase might be helpful to include on the instruction page:

3. Implement security measures:

Churches should implement strong security measures to protect their cryptocurrency holdings, such as enabling two-factor authentication, using strong passwords, and regularly updating software.

Crypto is still in the messy infancy stage at this point and is a bit like the wild-wild west. Remember the internet in the mid 90s?

How should cryptocurrency donations be reported for tax purposes?

Churches should report cryptocurrency donations as they would report other non-cash contributions.

Here are the key steps:

1. Record the fair market value: Churches should record the fair market value of the cryptocurrency donation at the time it was received. This value can be determined using reputable cryptocurrency price indexes like CoinMarketCap or CoinGecko.
2. Provide a donation receipt: Churches should provide donors with a written acknowledgment of their cryptocurrency donation, including the date of the donation, a description of the cryptocurrency received, and the fair market value at the time of the donation.
3. Report on Form 990: If required to file an annual Form 990, churches should report cryptocurrency donations in the appropriate sections, such as Schedule M for non-cash contributions.
4. Consult with a tax professional: Church leaders should consult with a tax professional experienced in cryptocurrency to ensure they are properly reporting and complying with all applicable tax regulations.

What are the potential benefits and risks of accepting cryptocurrency donations?

Benefits of taking crypto donations:

1. Attract younger, tech-savvy donors: Accepting cryptocurrency donations can help churches appeal to younger, tech-savvy members who may prefer to give using digital assets.
2. Benefit from potential appreciation: If churches hold onto cryptocurrency donations, they may benefit from the potential appreciation of these digital assets over time.
3. Lower transaction fees: Cryptocurrency transactions often have lower fees compared to traditional payment methods like credit cards or bank transfers.

Risks of taking crypto donations:

1. Volatility: Cryptocurrencies are known for their price volatility, which can result in significant fluctuations in the value of a church’s holdings.
2. Security concerns: Cryptocurrencies are targets for hackers and cybercriminals. Churches must implement robust security measures to protect their digital assets.
3. Regulatory uncertainty: Cryptocurrency regulations are still evolving, and churches must stay informed about any changes that could affect their ability to accept or manage digital asset donations.

How can churches educate their members about cryptocurrency donations?

Churches can educate their members about cryptocurrency donations by:

1. Hosting educational workshops: Churches can invite cryptocurrency experts to host workshops or seminars to teach members about the basics of digital assets, how to securely buy and donate cryptocurrency, and the potential tax implications.
2. Creating educational content: Churches can create blog posts, videos, or infographics that explain cryptocurrency donations in simple terms and provide step-by-step guides on how to make a donation.
3. Providing resources: Churches can curate a list of reputable resources, such as cryptocurrency news websites, beginner guides, and tax information, to help members learn more about digital assets and how they can support their church through cryptocurrency donations.

Should churches hold onto cryptocurrency donations or convert them to fiat currency (aka Dollars)?

The decision to hold onto cryptocurrency donations or convert them to fiat currency depends on a church’s financial goals and risk tolerance.

Here are some factors to consider:

1. Appreciation potential: If a church believes in the long-term potential of cryptocurrencies, holding onto donations may allow them to benefit from any future appreciation in value.
2. Volatility risk: Cryptocurrencies are known for their price volatility, which can result in significant fluctuations in the value of a church’s holdings. Churches with a lower risk tolerance may prefer to convert donations to fiat currency to mitigate this risk.
3. Liquidity needs: If a church requires immediate access to funds for operational expenses or outreach programs, converting cryptocurrency donations to fiat currency may be more appropriate.
4. Investment strategy: Some churches may view cryptocurrency donations as part of a broader investment strategy. In this case, holding onto donations may align with their long-term financial goals.

Ultimately, church leaders should consult with financial professionals and their board members to determine the best approach for their specific situation.

How to convert a crypto donation to a cash (fiat) donation?

This video breaks it down:

Are there any one-and-done solutions for accepting complex donations like cryptocurrency?

Yes, Engiven is a popular option for accepting crypto, stocks, and other complex forms of donations.

Check out their site for more details.

Wrapping things up

Accepting cryptocurrency donations can be a valuable way for churches to engage with younger, tech-savvy members and potentially benefit from the appreciation of digital assets. However, church leaders must carefully consider the legal, security, and tax implications of accepting cryptocurrency donations.

By following best practices for security, providing clear guidance to members, and staying informed about regulatory developments, churches can successfully navigate the world of cryptocurrency donations and support their mission in new and innovative ways.