“As investors, particularly millennials, combine their interest in digital currency with their charitable values, digital assets have the potential to become a significant source of funding for philanthropy,” Oommen said.
Cryptocurrency is relatively new, and investors still have things to learn about it. Thirty-eight percent of cryptocurrency investors said they were not aware that selling digital assets is a taxable event. Also, there is significant confusion about donating these assets to charity, when in fact it is a tax-savvy strategy that can minimize the investor’s tax burden. Fifty-five percent of the Fidelity respondents said they were not sure digital assets could be donated to charity.
Despite the lack of knowledge on the part of some cryptocurrency owners, other owners are beginning to explore using digital assets for charitable purposes, the study said. One-third of cryptocurrency owners said they have already donated digital assets to charity.
“Reflecting the challenges that still exist in transacting in cryptocurrency, 46% said it was difficult to find charities that accept cryptocurrency donations; 50% said the charity required a larger amount when dealing with digital assets than they wanted to give; and 44% said it was a cumbersome process,” the study said. “Even as digital currencies become part of everyday transactions, many individuals, businesses, regulators and institutions are struggling to keep up with the breakneck pace at which the landscape is shifting.”
“As the cryptocurrency market expands and matures, we would expect to see that many of the transactional processes that investors find clunky or difficult today become smoother, including the ability to donate these assets for charitable purposes,” Oommen said. “There is a tremendous role advisors can play here in not only educating clients on the implications of investing in cryptocurrencies, but in helping them look across all assets they hold to determine the most effective way to support their charitable giving.”