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Cryptocurrency enthusiasts may be more philanthropic than the average investor.
Nearly half (45%) of cryptocurrency owners donated $1,000 or more to charity in 2020, compared to 33% of the full investor population, according to a study by Fidelity Charitable.
There are a few reasons this could be. Cryptocurrency is a highly appreciated asset class, so crypto owners have seen a lot of gains, some of which came by surprise, says Tony Oommen, vice president and charitable planning consultant at Fidelity Charitable.
"It’s almost like found money that they’ll give away,” Oommen says.
Another potential explanation is that young people, who are more inclined to buy cryptocurrency, are also more likely to give to charity than older generations. Nearly half of millennials (48%) say they are knowledgeable about cryptocurrency, compared to 18% of all investors, according to the study, which looked at 1,216 investors in the U.S. who have a minimum of $25,000 in investable assets outside of an employer retirement plan. And 35% of millennials own cryptocurrency, compared to just 13% of all investors.
Meanwhile, nearly 90% of millennials say charitable giving is an important part of their lives, while 74% of the total population says the same, the study found.
While the investors included in this study didn't necessarily donate cryptocurrency to charities, that is an option. But it's a bit complicated.
Because cryptocurrency is still relatively new and has only recently boomed among everyday investors, the full financial implications of actually donating crypto to charity is not fully understood, Oommen says. Plus, most financial advisors aren't able to recommend cryptocurrencies to their clients, since the asset isn't regulated by agencies like the Securities and Exchange Commission and Financial Industry Regulatory Authority. The IRS treats cryptos, like Bitcoin, as property so selling cryptocurrency is a taxable event. But donating crypto directly to charity may get you a tax deduction.
But as the crypto marketplace changes and expands, there may be more understanding around how to donate digital assets to charity, and the benefits of doing so, he adds.