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Crypto Is Now Part of the Charitable Conversation

Are you ready to help your clients and the next generations of their families?

You might want to reconsider if you’re still skeptical about cryptocurrency or its ability to do anything positive for society. I’m aware of a charity onboarding a crypto gift of nearly $900 million—with several similar gifts in the pipeline. Increasingly, charities are seeing gifts of crypto as low-basis asset gifts that are treated like long-term capital gain assets, just like publicly traded stock.

Will All Charities Accept Crypto Gifts?

No. Like real estate, many charities don’t accept “complex” assets such as crypto. They can’t evaluate it properly, and they’re not equipped to administer it and distribute it like they can with cash and marketable securities. For instance, they may not have a gift acceptance policy that allows them to receive things like real estate and other complex assets. They may not have a checklist that says what they must ask donors before accepting it. Some charities may not want the risks (or publicity) associated with crypto, just like many are leery of large real estate gifts that could cause environmental concerns.

That being said, many charities are set up to accept cryptocurrencies. Even Fidelity’s massive donor-advised fund platform allows crypto gifts. According to Fidelity, 95% of crypto owners have made charitable investments, and the size of those investments may increase dramatically as 90% of global family office clients are new “inquiring about or demanding” the inclusion of crypto in their portfolios, according to new research from Ocorian. In fact, crypto contributions to Fidelity Charitable have totaled more than $300 million through the first four months of 2024, up from less than $50 million for all of 2023.

Clearly, crypto-based gifting is a growing trend. As an advisor, you should get up to speed on crypto gifting because, before long, clients will ask you for advice about their highly appreciated crypto holdings just as they do for any other highly appreciated long-term asset. If you want to keep working with the next generation in your client families, I urge you to get up to speed on crypto gifting.

Another reason I bring this up is that a Fidelity Charitable study found that two in five (38%) crypto investors weren’t aware that selling digital assets was a taxable event—just like selling long-term appreciated securities. The study also found that only half of investors knew digital assets could be donated to charity. 

That’s where you come in.

Good Candidates

Crypto gained about 130% on average in 2023 versus 20% for U.S. stocks. You may have more clients than you think with substantial unrealized crypto gains – and overconcentration – that could be mitigated through tax-advantaged gifting. In terms of tax planning, here are some other ways your clients can benefit from making gifts of appreciated cryptocurrency to charity:

  1. The tax deduction is generally equal to the fair market value of the donated cryptocurrency. Gifts of assets other than cash or marketable securities are subject to the qualified appraisal standards set by the Internal Revenue Service.
  2. Instead of paying capital gains taxes on the appreciation, the Internal Revenue Code Section 501(c)(3) charity receives the full value of the donor’s contribution. For those donating to split-interest trusts (charitable remainder trusts or pooled income funds), that means 100% of the capital is available to produce income.
  3. While many charities accept crypto directly, contributing the currency to a donor-advised fund may be easier.
  4. With a single contribution, donors can support several charities immediately (or over time) while being able to claim a tax deduction right away. This may be more administratively efficient than sending smaller amounts of crypto to charities directly and having to collect individual tax receipts from each organization. 

Structuring the Gift 

Going back to the $900 million crypto donation I’m aware of, here’s how the gift is being structured: The donor will contribute the crypto to a limited liability company (LLC) and then donate the LLC to the charity. Otherwise, if they sold the crypto and converted it to cash, they would have a recognition event. Also, by using an LLC, the charity doesn’t have to worry about obtaining its own crypto wallet or other trading mechanism. The donor can be the managing member of the LLC and manage the crypto sale. This makes it easier for the charity to receive and relieves it of the administrative burden of the gift. This is especially helpful for less sophisticated, smaller organizations.

If you’re unfamiliar with the mechanics of donating an LLC to charity, ensure you have a skilled practitioner to help you. This isn’t a do-it-yourself project.


Randy A. Fox, CFP, AEP  is the founder of Two Hawks Consulting LLC. He is a nationally known wealth strategist, philanthropic estate planner, educator and speaker. 

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