Crypto-philanthropy in Africa: Here are 4 use cases to inspire your giving

Digital assets have changed how we define wealth beyond the traditional sense. Just like the physical assets, they appreciate and depreciate in value. In the same light, they can also be donated. According to verified market research, the global digital asset management market size was valued at $3.7 billion in 2020 and is projected to reach $14 billion by 2028. This is mainly attributed to the rising investments in marketing and digitization of content.

What is a digital asset?

A digital asset is an electronic file that can be owned and transferred by individuals and used as a currency to make transactions or store intangible content. They come in form of digital art such as the now commonly spoken about non-fungible tokens (NFTs), cryptocurrencies such as Bitcoin and Ethereum, and stablecoins such as cUSD and USDC. Records of ownership are held using blockchain technology where the transfer of the digital assets is transacted without the need for a central intermediary such as a bank.

Due to its value, high security, high speed of transactions, low transaction costs, and new market opportunities, digital assets are used for investments, transactions, exchanges, and philanthropy among other uses.

Crypto-philanthropy

Philanthropy as we know it is the generous giving of money or assets to promote the welfare of others. Crypto-philanthropy is the donation of any cryptocurrency such as bitcoin, alternative coins, or stablecoins to a charity supporting a worthy cause.

Cryptocurrency has created a new form of wealth which has opened up new opportunities for charities to explore. Crypto-donation differs in many ways from traditional donation beyond the method of donation. The availability of these digital assets is spurring a new trend of donating cryptocurrency to worthy causes.

One of these changes is the age of crypto-donors. Over 60% of crypto users are under the age of 40. This has produced a wave of younger people who are participating in philanthropy through cryptocurrency. How young? According to United Way, a charity organization, the average age of users is 45 to 65 years old with 80% females. Since they started accepting crypto donations in 2014, the average age of visitors to their crypto donation site is 25 to 35 years with 80% male.

Crypto-philanthropy is gaining popularity and the frequency of giving also has increased. According to Fidelity Charitable, the non-profit advising donors on charity giving, 45% of cryptocurrency investors donated $1000 or more to charity in 2020 compared to 33% of general investors. The NGO received $331 million in cryptos in 2021 compared to $28 million in 2020. More crypto donation platforms such as Giving block are reporting a 1,558% spike in donation volume.

What makes crypto-donation lucrative to crypto philanthropists?

  • Tax-efficient

In many countries, donating assets to non-profits acts as a tax write-off for donors by reducing the amount of taxes they owe by giving away money to charity. When cryptocurrency investors sell their coins and get profit from them after an appreciation of value, they pay 37% of their profits to capital gain tax. If they donate the coins, they are exempted from the tax. Most crypto investors prefer donating their gains in crypto than in fiat. Through donor-advised funds, the crypto-donors create a dedicated account where they trade, store, and transfer crypto to non-profits at their discretion.

  • Cheaper transaction cost

Crypto-donations are preferred because the transaction cost is less compared to traditional donations. The processing fee on credit card transactions can incur a 2.2% to 7.5%. A cross-border transaction using wire transfers can incur a 6% fee to it which can be costly. Crypto transactions are cheaper and may incur as low a charge as 0.4%, and they take less time compared to traditional transactions.

  • Anonymity

Cryptocurrency also guards the anonymity of donors. Despite blockchain technology being a big proponent of openness and transparency, it also provides anonymity to individuals. Cryptocurrency users are identified with their wallet addresses and not their names. This works to the advantage of crypto-donors who want to remain anonymous

How to crypto-donate

In order to donate crypto, one has to have crypto assets on a platform such as Binance or Coinbase. You could choose to share your crypto wealth or profits gained either from an exchange or through lending. You can donate the profit you gain from an exchange when you sell coins when the prices go up. As for lending, you could opt to donate the interest you get when you lend your crypto for fiat. Alternatively, you could also donate your crypto directly to nonprofit organizations.

The easiest way to donate crypto is by transferring the digital assets from one wallet address to other using platforms such as Valora or Metamask. You could also opt to use crypto non-profits such as the Giving Block where you connect your wallet address to it and donate directly to a cause.

Knowing how to crypto-donate is the easy part but choosing which cause to donate to can be the hard part as there are many worthy causes that need funding. Crypto-philanthropy is big with more young donors investing in cause-based non-profits rather than organization-based nonprofits. Whether you are a regular crypto-philanthropist or new to crypto-donation, choosing a cause can be overwhelming. Here is a list of four use cases of crypto-donation in Africa.

  1. Universal Basic Income (UBI)

These are guaranteed no–strings attached recurring payments to every member of the society, sized to meet the basic needs and delivered to everyone within a community. This could be government-sponsored income or NGO-sponsored income. UBI is critical for alleviating absolute poverty in many countries, especially in Africa. Since its conception in the 1800s, UBI has been a great source of income for refugees and people in need by supplementing their income in order to provide basic necessities.

In Africa, crypto-donation for UBI has been a great support for refugees. This can be seen with Impact Market, a decentralized poverty alleviation protocol that enables any vulnerable community to implement poverty alleviation mechanisms. Crypto-philanthropists can donate stablecoins which go to support communities that need it most. Through crypto, the UBI is timely received on a daily or weekly basis. Also, cryptocurrency ensures a transparent and accountable process of transaction that sees to it that each beneficiary receives their funds. Once they receive the funds, they can off-ramp to their mobile money via Kotani Pay and withdraw from their local mobile agents. For most refugees, UBI has enabled them to open businesses, supplement their income, and access basic necessities.

2. Environmental Conservation

Another cause to explore is fixing our environment after years of degradation. With the increase in global temperature, global warming is a real threat manifesting across the world. The effect of this is disastrous weather such as floods and drought. This is mostly attributed to an increase in CO2 emissions released to the atmosphere mostly by human activities such as cutting trees and burning down forests. In response to this, is environmental conservation organizations that planting trees to trap the CO2 emitted.

Such an organization contributing to environmental wellness is Treejer. The organization functions as a link between tree funders and planters. Crypto-philanthropist can donate their crypto that would be used to pay farmers in Africa for planting trees in high-impact locations. These farmers can then use Kotani Pay to convert their cryptocurrency into local currency and off-ramp to their mobile money. These methods of donation and payment are open and transparent giving crypto-donors a chance to track and fund tree planting activities.

3. Development

For developing countries, there is a surplus amount of projects that require funding. Crypto-philanthropists can venture into donating to development projects such as building wells for people living in drought-stricken areas and building dormitories for girls in marginalized areas. This supports communities by helping them improve their access to more services. This is ideal for crypto-donors who prefer donating to fundraisers.

Save the Children Rwanda has explored this through its project that aims to ensure the gains associated with blockchain reach the world’s most vulnerable children. Save the Children in Rwanda can now fundraise in Cardano’s cryptocurrency, ADA, having installed a payment gateway that allows ADA donations to come directly to the project without intermediaries. These funds are being invested in African-based social enterprises with a proven impact on children, families, and youth. Over 22,000 ADA, worth nearly US$30,000, was donated through the system within hours of its launch.

4. Humanitarian crisis

Whether it is a natural disaster or a pandemic, humanitarian crises have brought the world together. The Russia-Ukraine war showed how crypto can be used for good as more support and donors from abroad sent their donations in support of Ukraine. Non-profits such as the Giving Block raised $1.5 million in crypto donations for the Ukraine Emergency Response Fund and Endaoment, a crypto giving platform raised over $2 million in crypto for charities supporting Ukraine.

Here in Africa, CARE, an international humanitarian organization has launched a crypto fund for humanitarian aid. Donors can now donate using cryptocurrency that will be directed to the many projects they undertake. In one of their pilot programs in Kenya, they explored how blockchain and cryptocurrency technology can improve aid delivery to women and women’s groups in particular. This uses cryptocurrency-based vouchers that can be redeemed for goods or services.

Despite the adoption of crypto-philanthropy by many donors, crypto-donation still faces challenges such as lack of acceptance in many African Countries. This is a huge setback as crypto-donation continues to skyrocket in use. There is also a lack of crypto-education for many non-profits which locks them out of opportunities. To solve this, the crypto community needs to spread awareness of the benefits of crypto to encourage mass adoption.

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