Bitcoin: It's Time for Canadian Nonprofits to Take Notice
by Jason Shim
Bitcoin is a digital currency that has attracted widespread media attention in the past year with a number of innovative businesses and nonprofits integrating it as a payment option. In particular, Canada has emerged as a hub of Bitcoin adoption and development, with Bitcoin-related startups—as well as Bitcoin ATMs (BTMs) popping up in Toronto and Vancouver—making it simple for individuals to acquire the digital currency.
Yes, but... what is bitcoin?
Introduced in 2009, Bitcoin is a computer program that is run on a decentralized network of servers around the world, designed to create and manage a supply of digital currency. Like the internet, it is decentralized and no single person controls the Bitcoin network. Every transaction on the network is logged and verified on the Blockchain, which is a universal public ledger.
A consensus among the computers on the network allows users to agree on who owns how many Bitcoins. Compared to existing online payment systems, it is a radically different way of thinking about how transactions are conducted online. (For more detailed information about Bitcoin and how it works, visit http://nonprofitbitcoin.org/)
Is it right for nonprofits?
In November 2013, Pathways to Education Canada became the first charity in Canada to issue tax receipts for Bitcoin donations and to date has received over $2300 in donations. It was an opportunity to explore an emerging technology for Giving Tuesday and was a relatively simple implementation.
I’ve had the opportunity to reach out to several donors who have contributed to Pathways to Education via Bitcoin to ask their reasons for donating. Many responded that they wanted to donate Bitcoin to a charity. When they Googled “charities that accept Bitcoin,” they discovered our organization, learned more and decided to make a contribution.
There is an understandable level of skepticism around the topic. It is, after all, a new technology. When I was at a conference earlier this year, a fundraising consultant laughed when I described Bitcoin and how it worked. The very next day, he learned one of their clients had a donor who wanted to donate $10,000 in Bitcoin. They had to quickly figure out how to receive and process this donation.
The need to develop the processes and procedures to accept Bitcoin as a digital currency is growing—it’s probably a question of when, not if. In recent years we have seen the Royal Canadian Mint explore digital currency via the Mintchip project, as well as the recently announced Apple Pay (a transferrable process that may readily apply to any future digital currency).
There are also funds like the Bitcoin100.org that provide $1,000 USD donations to charities around the world for implementing Bitcoin, helping to offset any setup costs. Generally, processing fees have precluded small transactions on the internet, but Bitcoin helps to facilitate these with no minimum charge. Fees at Bitcoin exchanges tend to be around 1%, which is significantly lower than most payment processors.
It is worth noting that online retail, and then online giving, was met with skepticism when it first emerged, but early adopters tend to be rewarded for their innovation.
Connecting with a new generation of donors
Another reason to explore Bitcoin is its accessibility. One of the most overlooked aspects of Bitcoin is its use among tech-savvy youth who are otherwise limited in participation from existing financial systems. QuickBT is a Canadian company that allows individuals to purchase Bitcoin using their debit card. In my conversations with QuickBT, it estimates that a quarter of users are under 18.
Our existing online financial systems are challenging for young people to access via traditional means such as credit cards, but it is relatively simple for them to obtain Bitcoin. Online games such as Bombermine.com have started allowing Bitcoin to be used to purchase premium digital items. It is not too far of a stretch to encourage youth to make micro-donations to charities in this way.
If you’re looking for more information in the form of case studies, there are several, including Sean’s Outpost, a charity based in Florida that has received over 400 Bitcoins worth over $200,000 USD at current market rates. United Way Worldwide also recently announced that they would be accepting Bitcoin donations.
I’m not advocating that every charity adopt Bitcoin as a payment option as it may not be right for all organization. But accepting Bitcoin is an opportunity for nonprofits to engage with tech-savvy supporters who are looking to contribute digital currency to charities. At the very least, organizations should be prepared with a plan of action on how they would respond if a donor approached them with a gift of Bitcoin. It is an opportunity to adapt to emerging global payment systems, tap into new demographics and develop new revenue streams.
Jason Shim serves as digital media manager at Pathways to Education Canada, an organization dedicated to helping youth in low-income communities graduate from high school and successfully transition into post-secondary education. Jason successfully implemented Bitcoin donations at Pathways to Education in 2013 and has advised numerous other nonprofits on how to do the same.