Blockchain could become a new fuel for charity

Nonprofit organizations are expressing great interest in cryptocurrencies. Most foundations would like to accept donations this way. There are already examples of successful experiments and charity programs using blockchain. However, there are still some obstacles to clear before blockchain can be used for charitable platforms.

For example, the World Food Program (WFP) implemented the Building Blocks blockchain system to collect and distribute donations for 100,000 refugees in Jordan and make remittances faster, more accessible, and more transparent. Other local programs and tests show blockchain does a good job of controlling and securing financial flows.

At the same time, few foundations plan to implement donation mechanisms using cryptocurrencies anytime soon. There are three main reasons why: uncertainty about the legal status of cryptocurrencies, technical difficulties, and a lack of understanding of how to properly account to the government for these funds. The organizations are also concerned about the ethical origins of cryptocurrency.

Before cryptocurrencies and blockchain can be widely used in philanthropy, several changes are needed:

A clearly defined legal status for cryptocurrencies used for charitable donations. Legislation in most countries does not prohibit charities from collecting donations in cryptocurrencies, but the legal status of such donations is still ambiguous.

More intermediary platforms that verify the legality of cryptocurrency. There are already organizations like Chainalysis that can identify the source of cryptocurrency in most cases. But so far, the services of such companies are too expensive for non-profit organizations to use.

Clear reporting rules. Although cryptocurrencies and blockchain are a transparent environment, a reporting mechanism for cryptocurrencies has yet to be developed.

More developers and blockchain specialists who can monitor and maintain the systems. Charities need specialists to guide them through the entire process, from cryptocurrency acceptance to reporting.

Proactive foundations attribute their interest in cryptocurrencies to the need to be more flexible, modern, and prepared to provide the most diverse set of donation tools possible to a wide range of donors. International transfers and donations become much easier with cryptocurrencies.

The more tools a foundation has, the more people can support its work. Cryptocurrency donors are a huge community of people who are willing and eager to donate and make a difference. The number of these people will only grow. Those who own or receive income in cryptocurrency are comfortable spending it without converting it into some other currency. These are also investors, entrepreneurs, and artists who sell their works as NFT.

However, foundations and nonprofits normally have little idea about the profiles of these cryptocurrency donor communities or their values, activities, and willingness to donate. At the same time, the two sectors share similar values: they see the world as decentralized, where everyone's decisions matter. This can become a starting point for the rapprochement of the charity and cryptocurrency communities.

The standard position of most foundations is that the mass adoption of cryptocurrencies in philanthropy will happen only when some major foundations become pioneers and show, through their own example, that receiving donations through cryptocurrency is possible, affordable, and transparent. A start has been made, but more than a few unique examples (like the Jordanian refugees) are needed to build a whole system.

Governments can also play a role here. In addition to legislative regulation, it’s possible to popularize cryptocurrency use among charities through special government initiatives. In addition, it will be necessary to educate NPO employees through online courses, lectures, advisory support from blockchain experts, and assistance from volunteers to develop technical solutions.