With the increased popularity of cryptocurrency as both an asset that donors give and one that shows up in investment portfolios, a specialist says it’s time for associations to make sure they’re up to speed on this new staple of the 21st-century economy.
In recent months, various cryptocurrencies—from Bitcoin to Dogecoin to Ethereum—have been in the news as they had meteoric price increases followed by big falls and more price rises. Despite its volatility, cryptocurrency has become a hot commodity.
“I think the figure was 46 million Americans own some form of cryptocurrency—so somebody in your office probably owns cryptocurrency,” said Maunda Land, CAE, CEO of Land Consultants, a firm that, among its services, helps associations with cryptocurrency. “This asset class is not going away.”
Since cryptocurrency is here to stay, Land contends it’s important for associations to learn more about the currency, which is often used as an investment vehicle, and be prepared to understand how it might be used in the association sphere. While cryptocurrency is an actual currency, Land thinks it will be of importance to associations not as a payment source for services, but on two asset fronts: donations and investments.
Are Your Members Crypto Millionaires?
“There is going to be a rise of a new class of millionaires and billionaires with cryptocurrency because you have people who were early adopters, and they still love their university, they still love their profession, and they still love their trade associations,” she said. “And they’re going to be looking for ways to donate that money.”
Land said there are going to be donors who want to give their cryptocurrency as is, similar to the way people donate stocks, rather than converting the asset to cash before donating. The advantages of donating the asset, rather than converting it to cash, says Land, is “to offset some of their gains and mitigate their tax liability.”
Associations need to be able to accept donations, large and small, in these cryptocurrencies. Land said the process for being able to take cryptocurrency isn’t hard but does involve setting up the right accounts and accounting protocols—including custodians and intermediaries. “Thankfully, there have been some roadmaps because there is going to a be a lot of adoption, and you’ll see that pickup over the next few months,” Land said.
While there are bright sides to being ready for cryptocurrency, the new asset class does have some drawbacks. Because cryptocurrencies are so volatile—with values going up and down a lot—associations should create a thoughtful policy about how to approach it, particularly if they receive it as a donation. By way of example, she noted that Ethereum billionaire Vitalik Buterin donated $1 billion in Shiba Inu cryptocurrency to India COVID relief funds. The cryptocurrency’s value plummeted shortly thereafter.
“The question is, would organizations want to keep that on their balance sheets?” Land said. “They might want to take that amount and transfer it to something more stable.”
But considerations like that are something that associations should be thinking about long before their favorite cryptocurrency millionaire decides to toss some coins their way.
Crypto for the Portfolio
The other area where associations should be thinking about cryptocurrency is in their investment portfolios, Land said. While she notes that associations have typically been risk-averse and slow to try new things, she says the cryptocurrencies are something association finance committees should be considering.
“As a responsible board member, you have to know all the opportunities out there for investments and gains for your portfolio,” Land said. “Cryptocurrency doesn’t have to be 10 percent to 20 percent of your balance sheet. But could it be 1 to 2 percent? There are ways to ease into your involvement in cryptocurrency.”
As the market is still developing, Land says now is the best time for associations to learn more about cryptocurrency and dip their toes in the water.
“I would say, the main thing is it is definitely important to connect with someone that can educate them and give them comfort on being able to begin to accept these donations,” Land said. “It is important to help organizations navigate this new asset class so they can succeed and grow their balance sheets as well.”
What’s your association’s experience with cryptocurrency? Share in the comments.