Crypto donations are unpopular as giving strategy
Digital money’s volatility, speculative nature raises concerns among advisers
Erica BullockMarch 16th, 2023
Some financial advisers here say they’re uninterested in recommending or servicing cryptocurrencies as planned giving strategies due to the speculative nature of cryptocurrency valuations coupled with a lack of regulation.
Mike Vickerman Jr., president of Vickerman Investment Advisors Inc., of Spokane, says, “Just from an investment perspective, I don’t believe there’s any fundamentals to cryptocurrency. I think they’re a very speculative investment that a lot of people have gotten burned on with the recent collapse of many of the main players. And it brings in bad characters.”
Vickerman adds, “We do not invest in cryptocurrency. Thus, we’d never be involved in giving cryptocurrency as a charitable donation.”
Paul Viren, owner of Spokane-based Viren & Associates Inc., says some financial planning companies prohibit brokers from planning or working with clients with crypto assets because cryptocurrency is a nonregistered asset for investment.
Viren says, “I’m prohibited from bringing up the word cryptocurrency with clients and thus I don’t have the ability to advise clients how to give that kind of an asset back to charitable causes.”
As a result of recent controversies surrounding the digital asset, in addition to some financial advisers’ skepticism, cryptocurrency as a charitable donation hasn’t really caught on as an emerging trend in the Spokane area, even though some nonprofit organizations such as the Salvation Army of Spokane have worked to accept those donations.
A statement from the Salvation Army of Spokane says that the organization’s Western territory partnered with Escondido, California-based Engiven Inc., a cryptocurrency donation platform, about two years ago to accept crypto donations.
“The Salvation Army does not hold onto assets such as cryptocurrency and immediately converts to cash for use in the community,” the statement says. “During the first year, as cryptocurrency continued to escalate in value, we received numerous contributions from crypto holders. However, as the value of cryptocurrency has declined, we have not received many contributions in the last six months.”
Viren says many larger charities will accept cryptocurrency. He adds, however, “I’ve not seen any action of them pursuing cryptocurrency on a proactive basis.”
Instead, some financial advisers suggest that their clients make charitable donations through three mainstream and more popular strategies, such as through qualified charitable donations, donor-advised funds, and gifting appreciated stocks.
Vickerman says, “Even with the correction of the markets last year, over the last 15 years, the wealth of clients has grown dramatically, and consequently charitable giving has grown at a similar pace. Last year alone, even in a down market … through qualified charitable donations, appreciated stock, and distributions from donor-advised funds, I estimate our clients gave approximately $500,000 to charities.”
Eric Green, founder and financial adviser at Spokane-based Purpose Financial Advisors LLC, says he helps about half of his clients plan for charitable contributions, but that cryptocurrency donations aren’t a part of his client conversations.
“There haven’t been any recent discussions, like in the last six months, and maybe that’s anecdotal with the value of a lot of cryptocurrency plummeting. It was a hot topic a year or two ago when the value was soaring,” Green says. “As a professional investment adviser and manager, I don’t do any cryptocurrency investing for my clients.”
Green is a member of the Spokane Estate Planning Council and the Inland Northwest Council on Planned Giving and recalls one organization he’s a member of that declined to accept donated cryptocurrencies because the asset wasn’t a popular choice for its donor base.
He also notes that some nonprofits might lack the investment needed to manage a cryptocurrency transaction. Administrating transactions of digital assets requires a different, and sometimes more complex, approach than other donations.
“You have to come up with a whole different set of protocols to handle it, and not every charity is ready to start that,” Green says.
Instead of addressing crypto donations, Green says he helps clients with other gifting strategies, such as the transfer of assets, including shares of highly appreciated stock, shares of mutual funds, or real estate.
Vickerman says many of his clients also give appreciated stock directly to charities through his company.
Viren says qualified charitable donations are another strategy that will work for individuals aged 70 1/2 and older, to give part of their required distribution from their retirement accounts to charity.
He says, “That’s been a popular strategy … and a tax-wise way to contribute to nonprofit organizations.”
Donor advised funds are another charitable giving strategy that Green, Vickerman, and Viren all support for their clients, they say.
Donor advised funds can be a way for donors to leave a legacy for their families, Viren explains. He says another benefit of donating to charity through this method is that the donations from the fund are disbursed based on the donor’s wishes to the causes they support.
“That’s a popular approach, especially if there’s a major event in someone’s life, such as a sale of a business … or some other windfall of money,” Viren says.
Aside from benefitting the community, charitable giving also allows clients to enjoy tax benefits, that when planned strategically, can be both self-serving and help a nonprofit, Viren adds.
Vickerman says he doesn’t see any extra-value incentive of giving cryptocurrencies to a charity currently.
“But I don’t think cryptocurrency is going away,” he says. “I think it will eventually turn into a regulated asset.”