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Colleges are being forced to understand crypto quickly.
Recent headlines have focused on higher education endowments investing in crypto funds, but there is another trend surfacing — millennials making crypto donations to their alma maters. These inbound requests to schools has required them to (1) learn what cryptocurrency is, (2) select an option for how to process the donation, and (3) identify the proper tax ramifications for both the universities and the donors.
It is no secret that colleges and universities expend a lot of resources to convince young alumni to make donations, regardless of size, within the first few years of graduation. They do this because it is rumored to be easier to get someone to donate a second time, rather than get someone to donate a first time. Given this context, fundraising teams are eager to accept any form of payment that a graduate would like to use during a donation.
Bloomberg recently noted that the earliest donations on record were in 2014. At the time, higher education institutions had no clue what cryptocurrency was, much less how to accept it legally. Questions revolved around securities law, valuation, taxability, and the technical nature of a new asset type.
When I interviewed Caitlin Long on the Off The Chain podcast, she told a story about trying to make a Bitcoin donation to her alma mater years ago but was rebuffed. The school realized it would be illegal to accept the donation because of money transmitter laws, along with other legal obstacles. Rather than walk away, Caitlin went to work with legislators to propose (and ultimately get approval for) new rules for anyone using cryptocurrency in the state of Wyoming.
While not every donor would be willing to go this far to make a donation, universities are quickly learning the nuances of what has become a large opportunity to tap into their young alumni base. I wouldn’t be surprised if the percentage of donations in crypto per year continues to grow as the crypto market grows and matures.
This phenomenon has a number of positive effects:
Universities are raising more capital to support education. There are plenty of people who believe higher education is broken, but I still believe it is a net positive for majority of people who attend.
More organizations and individuals are becoming crypto users. Any increase in adoption, regardless of the reason, is a good thing at this point.
Endowments will become familiar with the asset class faster. Some colleges and universities will be forward thinking enough to invest directly in crypto, but most will learn only when they are forced to. Having to manage crypto from donors is a great way to grab their attention.
Endowments are some of the first types of organizations to deal with this scenario because their target donor base tends to skew younger. As this cohort of people grows older, and as crypto becomes more popular, every non-profit will eventually have donors offer crypto donations. This type of adoption won’t move market prices, but it further legitimizes the industry as a serious asset class in the minds of institutions.
Satoshi created a peer-to-peer electronic cash system to take on government-backed fiat currency. Now, young crypto enthusiasts are using that magic internet money to fund higher education.
Just wait till the crypto wealthy start demanding changes to the content being taught in those schools…
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