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As Russia began to invade Ukraine, the Ukrainian government asked the world for aid in the form of cryptocurrency. Crypto investors have since donated more than $59 million to the cause, according to blockchain analytics company Elliptic.
Some are calling the Russia-Ukraine conflict the world's first crypto war, since Ukraine has amassed so much in digital aid and also due to concerns that Russia will use cryptocurrency to evade sanctions. Ukraine ranks fourth in the world in terms of crypto adoption, according to the blockchain research company Chainalysis, Recode reports, and the country currently accepts donations of bitcoin, ethereum, tether and dogecoin.
Last week, Ukrainian Vice Prime Minister Mykhailo Fedorov announced AidForUkraine, a collaboration between the Ukrainian government bodies, the crypto company Everstake and the blockchain platform Solana. What's more the major crypto exchange Binance announced that it has donated more than $10 million to its Ukrainian Emergency Relief Fund. According to Binance’s website, the money will support intergovernmental organizations and local NGOs providing refugees and children with food, fuel and supplies. You can donate to this Ukraine relief fund through the Binance Charity platform. It currently accepts binance coin, binance USD (a type of stablecoin, or cryptocurrency whose value in this case is pegged to the U.S. dollar), bitcoin and ethereum.
Here's what to know about donating cryptocurrency to support Ukraine.
What U.S. charities are supporting Ukraine?
If you have crypto to donate, you can give to U.S. and international charities supporting Ukraine through The Giving Block, an organization that vets nonprofits and helps them create secure platforms that accept crypto donations. It recently launched the Ukraine Emergency Response Fund, which supports a network of charitable organizations driving humanitarian efforts in the country, including Save the Children, Food for Life Global-Americas and International Medical Corps. The Giving Block says the Ukraine fund is a 501(c)3 fund run by Renaissance Charity. Americans who donate to 501(c)3 charitable organizations may be eligible for tax benefits (more on that later). You can donate directly to the fund or to individual charities within the fund, all of which are 501(c)3-designated organizations. The fund currently accepts more than 70 cryptocurrencies, including bitcoin and ethereum.
When you donate through The Giving Block’s platform, you can request a tax receipt of the transaction. If you're eligible for tax breaks, you can use this to claim them when you file your taxes.
How to donate crypto to Ukraine
If you already own crypto, you can use your crypto wallet account to send a designated amount of the currency directly to the crypto address of a reputable nonprofit or the Ukrainian government. In most cases, it'll take a few simple steps. Click “withdraw,” choose the currency and amount, and input the receiving crypto wallet address. Some organizations may also have QR codes on their official sites which you can link to your crypto wallet.
However, some potential donors may be at a disadvantage here. Robinhood is an example of an investing app that lets you buy cryptocurrency, but it currently doesn't let you move your crypto off its platform. Also, some exchanges charge fees for transferring crypto to external crypto wallet addresses.
But be careful if you decide to sell your crypto through an app like Robinhood and then use the cash to buy more crypto through a different source to donate. If you sold your crypto for a profit, you may owe capital gains taxes.
How to avoid scams
While a humanitarian crisis can make people open their hearts and wallets, it also opens the door to cyber criminals. To avoid scams, the best move you can make is to conduct thorough research on the organizations you plan to support.
But even the usual due diligence is not enough when you’re donating crypto. You also need to make sure you’re donating your crypto to the right wallet address. One effective way to verify a wallet address is to visit the organization's official website or call it to confirm where it publishes its crypto wallet address, says David Weisberger, CEO of CoinRoutes, an algorithmic trading platform for buying and selling crypto. From there, he says you should always copy and paste the address into the recipient field in your digital wallet.
The Giving Block's co-founder Pat Duffy says donors should beware of donation links on social media and websites that don’t belong to official nonprofits. Cyber thieves may flock to social media claiming they are raising crypto donations for a legit nonprofit, but they share the crypto wallet addresses to their own accounts.
One way to check if a nonprofit’s social media post is legit is to make sure the account is verified. On Twitter, this is indicated by a small blue check symbol on the account’s page. Emails should be taken with caution, as it’s easy to create malicious emails that appear to be coming from a legit nonprofit. You should make sure the sender's email address matches the organization. And most experts suggest phone call or text message solicitations are red flags, especially if you have no prior relationship with the organization.
The Better Business Bureau made a list of BBB-accredited nonprofits currently operating in Ukraine. These include Save the Children, Catholic Relief Services and GlobalGiving.
Beware of individuals claiming to be stuck in Ukraine and in need of help. Avast, a global cybersecurity company, recently published a report indicating the firm tracked a handful of cyber criminals pretending to be Ukrainians in need on Twitter. So unless you know the person and they can confirm it’s their crypto wallet you’re donating to, it’s best to avoid this.
Avast notes to be aware of the immediate mention of bitcoin, as well as of social media profile names that consist only of letters and numbers. The cyber security company suggests never donating crypto directly to strangers since it’s “virtually impossible to deduce if it is a person in need or a scammer.” Instead, they suggest you donate crypto only to reputable organizations and that you initiate the transaction directly on their official website. Tomáš Foltýn of the global digital security company ESET tells Yahoo! News that the firm’s research team found a “bevy” of fraudulent websites claiming to support humanitarian efforts in Ukraine.
Tax implications of donating crypto to Ukraine
When you sell your crypto for more than you purchased it for, you may owe capital gains taxes on the profits. The capital gains tax rate generally ranges from 0% to 37%, depending on your income and how long you’ve held the crypto. (Short-term capital gains on assets held for one year or less are taxed at ordinary income tax rates.) But if you donate the appreciated crypto to a 501(c)3 charity, you can usually avoid the capital gains tax.
And if you itemize your taxes, you may get a second tax benefit, says Daniel Rodriguez, an accredited investment fiduciary and chief operating officer at Hill Wealth Strategies, a wealth management firm in Richmond, Virginia. If you’ve held your appreciated crypto for more than a year, you generally can deduct the fair market value of your crypto donation at the time of the donation (up to 30% of your adjusted gross income) when you file your taxes. If you’ve held it for less than a year before donating, you generally can deduct the price that you originally bought the crypto for, as opposed to the appreciated value.
Eric Bronnenkant, head of tax at digital investment advisor Betterment, recommends you avoid directly donating crypto that has dropped in value since you first purchased it. Instead, he recommends you sell the crypto and donate the cash. Doing so may help you realize a loss to offset any future capital gains taxes you may owe, and you can receive a tax deduction for your cash contribution if you itemize.
But keep in mind that these tax benefits generally apply to U.S. taxpayers who donate to 501(c)3 charitable organizations. So donating crypto directly to wallets operated by the Ukrainian government will generally make you ineligible for tax breaks.