Non-fungible tokens (NFTs) continue to trend, but they aren’t just a way to claim ownership over digital art. People are finding ways to use NFTs to give back.
NFTs have been grabbing headlines all year. From massive digital art sales to critics claiming they serve no purpose, there is no shortage of interest in these tokens.
At the moment, the NFT boom is focused on its unique ownership model for digital objects. However, there are impressive use cases beyond artists and musicians.
While some wonder whether NFTs have any purpose beyond the hype, charitable organizations find them a valuable tool for fundraising.
Charities and the blockchain
Some charities have already familiarised themselves with alternate donations, especially cryptocurrency.
Interest, or at least, consideration of donations in cryptocurrency increased following the lockdowns due to the COVID-19 pandemic.
This was because in-person charity events were no longer possible, so this version of “fringe” financing became more appealing. In addition, they are permissionless and borderless, making donations from across the world more accessible.
Significant organizations have been accepting cryptocurrency donations for a while. The American Red Cross has been accepting bitcoin since 2014. UNICEF launched its CryptoFund in 2019 to allow it to accept cryptocurrencies.
In addition, crypto start-ups like The Giving Block are linking non-profit organizations with the ability to receive donations in crypto. The initiative helps smaller or uninformed non-profits accept these donations.
NFTs raising money
Now, NFTs are the next fundraising frontier. Unlike cryptocurrencies, they offer something beyond a direct monetary donation.
NFTs have allowed charities, celebrities, and individuals to auction off their digital creations, with all the proceeds going to a charity of their choice.
Beeple, the artist who still holds the record for the most expensive NFT ever sold, auctioned another NFT for charity. The artwork sold for $6 million. The proceeds went to the Open Earth Foundation. The entire show the artwork was part of was in aid of the foundation.
“NFTs have had a huge impact on the charitable sector. We see a huge increase in donations related to NFTs,” says Alex Wilson, co-founder of the Giving Block.
“It’s been great to see an outpouring of support from NFT creators who are donating all or a portion of their NFT proceeds to charities that accept crypto.”
Big celebrity names outside of this niche art world have also released their own NFTs for charity.
“We’re hoping that this becomes the cultural norm in the NFT market for the creators so that it can become a sustainable funding source for nonprofits around the world,” says Wilson.
NFTs as charitable donations
Since an NFT is a store of value, a person can donate an NFT to a charity as the donation itself.
This would be similar to how people donate valuable items for charity auctions or other events to raise money.
However, whether a charity is interested in an NFT would depend on how much those involved understand NFTs and their value. Also, how valuable that particular NFT is.
This is currently not the most popular route through which charities work with NFTs, but it could hold possibilities for the future.
In one example, the CEO of Big Cat Rescue, Carole Baskin, explains how cryptocurrencies, NFTs, and tech like virtual reality and augmented reality can help charities build a world in which their supporters can interact together.
“I see this as a kind of gateway to a much, much bigger thing that I want to do for the cats, and I could see any charity as kind of building their metaverse where they attract people of like minds together,” she said in an interview with BeinCrypto.
Baskin recently released the $CAT token for fans and supporters to purchase. She plans to follow this up with a launch of cat NFTs as well.
Nonprofit, Save the Children also partnered with NFDoge, a platform that sells “Non-Fungible Doge” artwork. 10% of the profits from the sales go to the organization, making it a partner in this auction rather than just the once-off end recipient.
Tax implications for non-profits
For non-profits, there are some tax considerations that go into holding cryptocurrencies. These are not considered cash donations, as crypto in many jurisdictions is an asset rather than a currency.
When it comes to NFTs, the guidance isn’t quite as clear. However, since NFTs are mostly sold on the Ethereum blockchain, should a charity receive the donations raised in cryptocurrency or be gifted the NFT itself, this does have implications for their books.
“Most nonprofits aren’t set up to accept an NFT donation directly due to the tax complications with the valuation before the auction is done,” the Giving Block explains in a blog post about NFTs as charity.
In the United States, at least, interest by the IRS in cryptocurrency declarations is increasing.
The recent US Tax Day saw citizens being asked about their cryptocurrency holdings as the IRS starts to take these investments and profits into account.
Increased interest and investment in cryptocurrency regulations will likely include NFTs in the future.
A new way to encourage donations
A key aspect of NFTs is that they offer a tangible fundraising option.
It is also undeniable that NFTs are experiencing a significant boom in interest. This is beneficial to organizations wanting to ride the wave to improved donations.
It also opens up charities to new worlds of people who may not have seen their calls to action before.
A study by the World Bank found that people prefer a reciprocal approach to give charity, meaning they get something for the money they give.
NFTs fulfill this function, depending on the way they are being leveraged for charity. An NFT auction encourages people to donate while promising them something should they be the highest bidder.
The progression of NFTs will affect their value to non-profits. This is just the first wave of these kinds of tokens, and it’s likely their purpose and reach will continue to change even more over time.