Crypto Gifts to Fidelity’s Philanthropic Powerhouse Soared 1.082%
(Bloomberg) — As the cryptocurrency boomed last year, the wealth of investors in the asset class increased, so did the amount of philanthropic gifts made with digital tokens.
According to a report released today, Fidelity Charitable, the largest grant-maker in the US, received $331 million in digital assets through its donor-aided funds, or DAFs, last year, nearly 12 times more than the $28 million it received in 2020. Is. Tuesday. Bitcoin contributes 88% to cryptocurrency donations, followed by Ether at 11%.
“We are seeing a mix of old and young donors” with crypto, Jacob Pruitt, president of Fidelity Charitable, said in an interview. He added that the organization’s team specializing in complex assets tries to sell donations of digital tokens as quickly as possible, because of their volatility and so donors can give funds faster.
Fidelity Charitable, the non-profit affiliate of Fidelity Investments, and other providers of DAFs can accept assets that many nonprofits cannot, from crypto to hedge funds and stakes in privately owned businesses.
This has helped increase funding in DAFs, because donating non-cash assets directly comes with a huge tax advantage: Under Internal Revenue Service rules, the donor can deduct the value of the gift plus any capital gains. Profits can be tax evaded. Investment. Fidelity Charitable has an estimated net worth of $50 billion.
Last year, two-thirds of donations to Fidelity Charitable came in the form of non-cash assets, according to the organization’s 2022 Giving Report. Total contributions increased to $15.3 billion for the fiscal year ended June, up 43% from the previous 12-month period.
Those assets have made Fidelity Charitable a major player in philanthropy. Funding from the organization grew 13% last year to $10.3 billion, with a 24% increase in donations in 2020. Funding for human service charities, such as food banks and homeless shelters, rose during last year’s big trend at a time when the pandemic hit. Increase DAF money going to arts and cultural organizations, increasing the sector’s share of Fidelity grants from 5% to 9%.
The popularity of the DAF and the rapid growth of the largest Fidelity charitable in the space has attracted scrutiny from nonprofits, philanthropists, and members of Congress, who have expressed concern that the charities are sitting in funds for too long, with immediate taxes. Provides deductions for money that does not reach the charity working in the fashion in time.
The bipartisan legislation, introduced in the Senate last year and in the House this month, would impose new rules on DAFs, including a provision that provides an advance deduction only for funds distributed within 15 years.
Pruitt warned that the new rules could have the unintended consequence of at least slowing down DAF grants.
“We support any proposal that expands to charitable giving, but we think this proposal is trying to solve a problem that doesn’t really exist,” he said. Fidelity Charitable strives to encourage donors to “make their money work and channel that money to nonprofits.”
The size of Fidelity has made it the target of other criticisms. In 2019, when Fidelity overtook the Gates Foundation as the nation’s largest grant-maker, a coalition of active organizations launched a campaign called Unmasking Fidelity.
It argues that Fidelity is “funneling millions of dollars through donated money to anti-Muslim, anti-Black, anti-LGBTQ and anti-immigrant organizations,” said Rama Kudaimi, a campaign director for the Action Center on Race and the Economy. Said, one of the unmasking groups in the Fidelity Coalition. “If the largest grantor sets the standard, hopefully others will follow suit.”
Pruitt said the grantor only makes donations based on legal criteria such as making sure the IRS has determined that the recipient is a legitimate nonprofit.
“These grants are not from us, per se,” Pruitt said. “They are based on the recommendations of our donors.”
While billionaires including Mackenzie Scott and Jack Dorsey have used Fidelity and other sponsors as a way for their giving stations, most DAF users are not super-wealthy. Fidelity manages approximately 175,000 DAF, and has less than $25,000 in average accounts.
According to its annual report, Giving Block, a startup that helps nonprofits accept and raise funds in bitcoin and other digital assets, saw a similar 16-fold increase in crypto gifts to $69.6 million last year. . Co-founder Alex Wilson expects this figure to rise again in 2022, even if crypto prices don’t skyrocket like last year.
While Fidelity only helps customers with more established coins, Giving Block also works with more speculative ones like Dogecoin, Shiba Inu and Dogelon Mars. The startup processed $358,155 worth of gifts from all three of them in 2021, mostly Dogecoin.
A CNBC survey in December found that most millennial millionaires hold the bulk of their wealth in crypto. Wilson said that for tax reasons, it makes sense to give your most appreciated asset first.
“We’re very clear with donors, essentially saying, ‘Would you rather donate to your favorite charity or donate to the IRS? They said. “It’s something that really resonates.”