South Korea’s Revised Donation Act: Is It A Step Forward or Backward for Crypto Philanthropy?
In Brief
South Korea forbids utilizing crypto for donations, which heavily contradicts with the global trend of crypto adoption in charity.
The Republic of South Korea made a surprising decision regarding its new donation rules, opting to bar crypto from the edited law. The South Korean Ministry of Public Administration made public that the corrected “Donations Act” will introduce several advanced donation options, like department store gift vouchers, stocks, and loyalty points from the internet giant Naver. However, it will forbid utilizing crypto like BTC.
The Ministry plans to make changes from July 2024. They are now awaiting approval from legislators. The move can potentially affect charity groups and their fundraising initiatives nationwide.
However, the recent implementation of the legislation will continue to allow benefactions in a stablecoin issued by the government, tied to the Korean won, and blockchain-powered gift certificates. This initiative aims to update the donation procedures established in 2006.
The news heavily contradicts the global trend of crypto adoption in charity.
Crypto Philanthropy in 2024
Following The Giving Block’s 2024 Annual Report on crypto philanthropy, crypto fundraising has become increasingly common among nonprofits, with over $2B estimated to have been donated using crypto as of January 2024. In the US, there are major top charities, and approximately 56% of them accept crypto donations in 2024. Moreover, over two-thirds of these actively fundraise using platforms like The Giving Block.
This has been majorly influenced by the sector’s growth, which has fueled philanthropy. There were an estimated 580 million crypto investors worldwide in January 2024.
Despite market corrections, nonprofits have persisted in adopting cryptocurrency fundraising strategies. A significant majority, accounting for 56%, of Forbes’ Top 100 US Charities have incorporated cryptocurrency donation options into their fundraising efforts.
Transforming Bitcoins into Big Impact
As per Fidelity Charitable, when you donate BTC or other crypto, you can benefit in two ways. First, you can deduct the fair market value of the BTC on your taxes, as determined by an expert assessment. Second, giving crypto is smart for taxes because you won’t have to pay capital gains tax on any increase in its value, and the charity gets the full amount of your donation.
When you give Bitcoin to a public charity, they sell it and put the money into a special fund for donors. You, as the donor, can then decide how this money is used. It might even grow without taxes before you suggest it to the charity you want to support.
Why Not Use Crypto in Charity?
According to the Australian Charities and Not-for-profits Commission (ACNC), accepting crypto has emerged as a strategy for charities to connect with donors beyond conventional methods. Notably, in Australia, the Taxation Office treats crypto as an asset, reflecting it on a charity’s financial statements.
However, integrating a system for crypto donations demands time and expertise. Charities must apprehend crypto trading mechanisms, determine accepted crypto types, ensure compatibility with donation platforms, and have proficiency in managing crypto wallets and issuing tax receipts.
Many lack the specialized skills or resources for managing crypto. Consequently, they opt to employ intermediaries for converting crypto donations to cash, handling tax matters, and disbursing funds, search for external help for marketing crypto contributions to potential donors, use crypto exchanges for immediate conversion to cash while handling donor relations and tax compliance in-house, and establish digital wallets for receiving, sending, and storing crypto, necessitating expertise due to the sphere’s anonymity features.
When venturing into crypto, charities must devise a thorough execution plan and examination process. This involves crafting policies for safety and security and handling high-risk assets or assets rather than cash. These policies should address accepted methods for receiving crypto, types of crypto accepted, procedures for donor identification and vetting donations to mitigate risks like money laundering or illicit financing, and decision-making on immediate conversion to cash or holding crypto-assets. By navigating these considerations adeptly, charities can harness the potential of crypto donations while ensuring compliance and safety.
While South Korea aims to remodel donation options through its revised “Donations Act,” the absence of cryptos such as Bitcoin or Ethereum could significantly impact philanthropies and fundraising efforts within the nation. However, despite this regulatory stance, the rise of crypto benevolence remains unmistakable on the global stage, as vividly portrayed in The Giving Block’s 2024 Annual Report. The momentum of crypto charities is on an upward trajectory, showcasing its potential to revolutionize traditional charitable giving models.
The appeal of tax deductions and the opportunity to avoid capital gains taxes serve as strong incentives for donors to embrace cryptocurrency for philanthropic purposes. Yet, the integration of crypto donation systems poses formidable challenges for nonprofits. It necessitates expertise in crypto trading, adept management of digital wallets, and meticulous adherence to regulatory frameworks. Nevertheless, despite these intricacies, effectively navigating this landscape enables charitable groups to unlock the full perspective of crypto while prioritizing safety, security, and regulatory compliance.
As the crypto sector continues to evolve, the convergence of technology and philanthropy heralds both exciting opportunities and daunting challenges for charitable organizations worldwide. Embracing this intersection with agility and foresight will be paramount for nonprofits seeking to remain relevant and impactful in an increasingly digital and interconnected world.
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About The Author
Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
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Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
