About the author(s)
Catherine Lee is a freelance writer/editor and former university media relations and communications director based in Philadelphia, Pennsylvania, U.S.
Shortly after joining San Francisco State University as the Vice President of Advancement, Robert J. Nava met with alumnus Chris Larsen, cofounder of the online mortgage lender E-loan and several Silicon Valley technology start-ups. Larsen, who had donated to SF State in California, U.S., in the past, was excited about a new business venture he was starting. For the next half hour, he talked about decentralized finance and the emerging technology of blockchain.
Leaving the 2010 meeting, Nava and a colleague were baffled until they learned that Larsen was talking about digital assets or cryptocurrency. Bitcoin, the world’s first cryptocurrency, had been released just a year earlier.
Fast-forward to April 2019: SF State announced that Larsen—who by then had cofounded enterprise blockchain company Ripple—and his wife, Lyna Lam, made a $25 million gift to the university ($22 million in the company’s XRP cryptocurrency and $3 million in cash). Nava describes the historic donation—believed to be the largest crypto gift ever to a U.S. university—as “transformational.”
Other philanthropists have made large crypto gifts to colleges and universities, but recently inflation, rising interest rates, and global economic fallout from the war in Ukraine have pummeled crypto (along with other financial markets), eliciting concern about the future of these digital assets.
Volatile by nature, the crypto market appeared to be headed for a new low in June 2022, when cryptocurrency bank Celsius halted withdrawals by its nearly 2 million users, prompting The Washington Post to report that the decision “underscored fears that some of the sector’s largest companies are on shaky financial ground.”
Despite the crypto market’s tendency to behave like a roller coaster, experts say that crypto philanthropy is here to stay. For advancement professionals who may be nervous about making a foray into crypto philanthropy in a time of volatility, Nava notes that turbulence in the financial world often creates new opportunities. Institutions that are interested in accepting crypto donations should lay the groundwork now so they’re ready when a donor wants to make a gift using digital assets, says Nava.
He believes there is no downside to taking crypto donations as long as institutions carefully implement all the steps required to accept such gifts. Nava outlined those steps in a 2019 article that he cowrote for the Association of Governing Boards of Universities and Colleges.
“Crypto donations may not be for every school, but the potential is there, and the returns can be substantial,” says Nava. “As advancement professionals, it’s our responsibility to do due diligence and think about how we present philanthropic opportunities to donors whether they hold crypto, real estate, stocks, or bonds.”
Cryptocurrency is a digital asset that functions like money, but routes through a computer network rather than a central authority like a government or a bank. Cryptocurrency uses blockchain technology—a digital public ledger—where information on each transaction receives a unique “hash” (or identity) and is added to the end of the ledger.
Bitcoin is an example of a “convertible” digital currency that can be used as a substitute for real and legally recognized currency even though it does not have the status of legal tender. Convertible digital currencies can be exchanged for dollars or other legal tender via cryptocurrency exchanges or used to purchase certain goods and services. El Salvador and the Central African Republic have passed legislation that enables cryptocurrency to be used as legal tender.
U.S. and European Union lawmakers have looked at ways to rein in the crypto industry, which, until now, has been largely unregulated. The EU adopted new rules in June 2022 that require cryptocurrency companies in its 27 member countries to acquire licenses and implement customer safeguards to issue and sell digital assets. In the U.S., two senators have introduced a bill that would establish new rules for cryptocurrency and give the Commodity Futures Trading Commission oversight of much of the industry.
There are more than 19,000 different kinds of crypto in circulation, with bitcoin and Ethereum among the most popular cryptocurrencies. As of July 6, 2022, the global cryptocurrency market capitalization—the total value of cryptocurrency—was $904.46 billion. While stock market capitalization is calculated by multiplying the share price times the number of shares outstanding, crypto market capitalization is determined by multiplying the price of the cryptocurrency with the number of coins in circulation.
In the U.S., crypto is not traded on the New York Stock Exchange. Crypto is bought and sold by investors using peer-to-peer online services or, more often, cryptocurrency exchanges—online platforms that match buyers with sellers. Considered by many the leading indicators of cryptocurrency value and performance, exchanges offer high volumes of trade and the most competitive rates.
Today, more colleges and universities around the globe have started accepting crypto donations, from the U.K.’s Cambridge Muslim College to Canada’s Simon Fraser University to Australia’s University of New South Wales.
Crypto philanthropy seems especially popular among younger donors who appreciate the quick, seamless donation process, which can be done using a mobile phone. Donors can make their gift either on an institution’s website or on a crypto donation platform like Engiven, The Giving Block, or NYDIG, among others. Engiven manages appraisals of crypto gifts, transactions, and receipts for donors. On The Giving Block’s website, donors can search a database for a particular institution’s profile page, which includes its mission statement and a list of the cryptocurrencies it accepts.
Nicholas Cary, an alumnus of the University of Puget Sound in Washington, U.S., and cofounder of crypto finance house Blockchain.com, made the first known cryptocurrency gift in higher education with his 2014 donation of 14.5 bitcoins (worth about $10,000 at the time) to his alma mater. Four years later, the blockchain software company Block.one committed $3 million worth of its cryptocurrency, EOS, to Virginia Tech, U.S, to support blockchain teaching and research.
The same year that Larsen and his wife donated $25 million to SF State, former Google software engineer Nikolai Mushegian pledged 10,000 MKR tokens (worth about $4.2 million) to his alma mater, Carnegie Mellon University in Pittsburgh, Pennsylvania, U.S.
In 2021, the University of Pennsylvania’s Wharton School received an anonymous gift of $5 million in bitcoin; Lehigh University in Pennsylvania received its first bitcoin donation, worth about $42,000, from alumnus Dev Chanchani; and the University of California, Berkeley’s Blockchain Lab received $50,000 in bitcoin from the EchoLink Foundation.
When Cary said he wanted to donate bitcoin as part of a comprehensive campaign at Puget Sound, the university, which had no gift policy on digital currencies at the time, was unsure how to proceed.
After conducting research, Puget Sound established an online, nonprofit account with crypto payment service provider BitPay. With the help of BitPay, which operates like PayPal, the university processed a “bill” in U.S. dollars for the pledged donation. Cary then received an email from BitPay with an invoice based on the exchange rate for bitcoin to U.S. dollars at the time.
Cary scanned a QR code in the invoice to transfer the bitcoin from his personal online wallet to the university’s BitPay account. BitPay acknowledged the payment, and after the transaction was completed, the payment appeared in Puget Sound’s BitPay account in U.S. dollars. From there, the money was deposited into the university’s bank account.
As cryptocurrency gained popularity, development officers at Arizona State University, U.S., started asking if digital assets might become a significant source of giving for younger alumni.
Conversations about crypto donations “evolved into one about meeting our donors where they are,” says Jeff Mindlin, Chief Investment Officer for the ASU Foundation. “Crypto seemed to be the natural evolution for the next generation of donors.”
The ASU Foundation created a Next Generation Council, whose members are successful, entrepreneurial alumni who have graduated since 2002. Council members recommend ways for fellow alumni to engage with the university.
When he joined the council about a year ago, Daniel McAuley, who serves as data lead for wholesale marketplace Inventa, helped analyze all of ASU’s data about alumni giving patterns. The analysis confirmed the benefits of crypto as a gift option for donors, particularly younger alumni who appreciate the ease with which they can donate.
Mindlin and foundation Chief Financial Officer and Treasurer Virginia DeSanto researched the policies and infrastructure needed to support crypto donations. At the university’s annual retreat for development officers in August 2021, Mindlin and DeSanto unveiled their strategy and let the development team know that ASU was “open for the business of accepting crypto gifts,” says DeSanto.
Initially, ASU used a Coinbase account to accept and process donations, but it proved to be somewhat labor intensive for donors and the foundation. Through connections in the crypto industry, McAuley met team members from the Engiven donation platform. He introduced the foundation to Engiven, which now manages crypto donations for ASU.
The university issued a news release in November 2021, noting that it was accepting more than 90 different cryptocurrencies. Engiven selected the cryptocurrencies, which are among the largest and most widely traded on the market.
Making it easy for alumni to donate their crypto earnings “sends the message that this is something you should be thinking about when you’re in your 20s and 30s, not just your 50s and 60s when you’ve had a great career and accumulated wealth,” says McAuley. “It lets younger alumni know that ASU sees where the world is going and can be entrusted to put their capital to work in shaping it.”
Mindlin says that ASU has had a few crypto donations but has not seen a significant increase in the number of crypto donors. In the early days of crypto philanthropy, “I think there was a ‘if you build it, they will come’ mentality about potential donors,” he says.
“I think some folks thought crypto philanthropy might appeal to a donor who didn’t have an affinity with a particular school,” he adds. “But at ASU, our donors seem more interested in simply having access to a different payment option.”
However, with the recent decline in the crypto market, those who hold digital assets aren’t sitting on as much in the way of gains, so there’s less incentive to donate crypto, Mindlin notes.
Two years before Larsen made his gift to SF State, he broached the idea of giving the bulk of his donation in crypto. Larsen, who had made previous gifts to the university’s College of Education, could have given the university $25 million in cash. But since part of his gift would establish an endowment for financial literacy innovation and enterprise, he says he saw the crypto piece as “a teachable moment” for his alma mater.
Because the board of the SF State Foundation was “relatively new at the time and a little unsure about crypto,” the foundation invited Larsen to a board retreat to talk about cryptocurrency, says Nava. Board member Mary Huss, President and Publisher of the Silicon Valley Business Journal and the San Francisco Business Times, moderated the conversation.
“Chris laid out the whole approach to crypto,” says Nava. “The retreat gave him exposure to the foundation’s directors and gave them a better understanding of this new world of finance.”
Nava now serves as Vice President for University Advancement, California State University, San Bernardino, U.S., and Executive Director of the CSUSB Philanthropic Foundation. Nava says he regrets that the SF State retreat wasn’t videotaped. The recording could have served as an instructional tool for CSUSB and other schools.
In addition to educating leadership and foundation board members about crypto, advancement offices and finance teams need to consult with legal counsel, work with their information technology departments to create web tools that enable donors to give quickly and seamlessly, and post crypto philanthropy guidelines online. One of the critical pieces to accepting crypto donations is amending an institution’s gift acceptance policy to legally accept crypto assets.
Venesia Thompson-Ramsay, SF State’s Associate Vice President for Operations, University Advancement, oversaw the liquidation of the crypto portion of Larsen’s gift. Thompson-Ramsay also serves as secretary and chief financial officer of the university’s foundation.
“Because crypto is volatile, we had to slowly liquidate the gift from Chris so as not to destabilize the market,” she says.
The university worked with market maker GSR, which liquidated the crypto over the course of about eight months. The university included a clause in its gift agreement with Larsen stipulating that if the value of the cryptocurrency fell below $22 million after liquidation, Larsen would make up the difference with additional crypto.
Larsen says the cost/benefit of accepting crypto “is a no-brainer.” In the early days of crypto philanthropy, “there was a lot of head scratching. But now there’s tons of infrastructure to make it super easy for institutions to get up to speed and there’s still a lot of wealth in crypto even after the recent correction.”
Before accepting tech entrepreneur Chanchani’s donation to Lehigh, Joseph E. Buck, the university’s Vice President of Development and Alumni Relations, tested the school’s cryptogift technology by making his annual contribution to Lehigh from his personal crypto account.
Buck describes the early days of crypto philanthropy, when there was little guidance about how to process gifts, as “the wild west.” But with increasing regulation of the crypto market and best practices in place for colleges and universities, crypto philanthropy in higher education is picking up steam.
Buck predicts that the volatility in the crypto market “will start to smooth out and begin to mirror the stock market’s volatility. There will be historical moments of great drops or great climbs, but I think we’ll start to see incremental stabilizing. With that, I think the number of crypto gifts will start to increase.”
Crypto transactions use “hot” and “cold” wallets in storing and liquidating crypto into cash.
In the U.S., crypto donations are tax-deductible and considered appreciated securities—so donors can deduct the fair market value of the crypto at the time of contribution.
Adding cryptocurrency as a donation option?
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Catherine Lee is a freelance writer/editor and former university media relations and communications director based in Philadelphia, Pennsylvania, U.S.
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