- 01/03/2020
Bitcoin is considered a digital asset. No one controls it and, unlike dollars or Euros, Bitcoin is not printed, minted or available physically. Individuals and businesses produce, use and trade bitcoins in the digital realm. Bitcoin continues to gain broader acceptance as a means of exchange and is certainly the most well-known “cryptocurrency”.
As several major charities were starting to accept bitcoin in response to donor interest, Fidelity Charitable decided to explore its ability to accept it.
Because the IRS considers Bitcoin property, there can be a tax benefit to donating it directly (also known as donating “in-kind”), rather than converting it to cash first. This is particularly true when the donor has held the bitcoins for investment purposes for more than a year. This required constructing a way to let donors contribute bitcoin to Fidelity Charitable directly, just as they can with other non-cash assets.
After a thorough research and interview process, the FCAT team found a solution: a third-party vendor and bitcoin exchange that focuses on converting Bitcoin to US Dollars. Utilizing this vendor let Fidelity Charitable streamline the process and allow its donors to take advantage of the tax benefit of contributing property. Just like a contribution of any other asset, donors could support multiple charities with their Bitcoin contribution. Once Fidelity Charitable accepts and sells the bitcoin for cash using the third-party vendor, the proceeds are put into the donor’s donor-advised fund. The donor can then recommend how the assets are invested as well as direct grants to qualified charities of their choice.
After a six-month iterative process, including prototyping, user testing and refinement, FCAT helped Fidelity Charitable launch a pilot program, complete with regulatory considerations, legal structure, and full technical and business requirements. We refined front- and back-end functionality and integration with each launch.
With the new donation capability in place, Fidelity Charitable added to its reputation as a pioneer in the charitable sector—and working with FCAT let it do so without disrupting its core operations. To date, Fidelity Charitable has facilitated over $107 million in charitable commitments in the form of Bitcoin and other cryptocurrencies.