Donating cryptocurrency as a gift, whether for a friend or a charity, has many advantages. For instance, you could introduce someone to the world of cryptocurrency and encourage them to start building their own portfolio. At the same time, crypto donations offer tax benefits. Even corporate gifts are now offering cryptocurrency to employees, contributing to a rewarding system that benefits everyone.
Still, there are several ways to give cryptocurrency, and you must also know which coin to buy that best fits the situation. Indeed, there are about 27 million coins available on the market, but it’s best to choose among the leading ones that have proven resilient and bounced back after significant hardships, such as Bitcoin, Ethereum, and even Solana. For starters, you can learn how to buy crypto with credit card on exchanges like Binance that offer a streamlined process and guide you to detailed resources.
Let’s learn more about gifting cryptocurrency, so you can easily offer it to friends or charities.
How can you gift crypto?
Luckily, you are not limited to the ways and sources for gifting crypto assets, as regulation is starting to take shape and more people are trusting it. So, you can offer them through:
- Gift cards. Trustworthy websites sell cryptocurrency gift cards, and they come in standard amounts, or you can choose one worth the amount of your deposit. After paying for it, the recipient will only have to access the website and enter the details to claim the gift;
- Crypto exchanges. This option is easier if you already have an account on a reputable exchange, as you can simply send the money to the person’s wallet address. However, if you really want to surprise them, creating an account on an exchange isn’t difficult;
What happens from the moment of purchase to the offering of the coins?
No matter the timeframe between buying the cryptocurrency and offering it to the person, you must store the assets somewhere safely. You can store it online or offline, but the safer option is to keep it offline for enhanced protection. So, your options are:
- Paper wallets. This is the cheapest way to store coins, as you simply write the key codes on a piece of paper or print the QR code for the account. Unfortunately, paper can easily be destroyed or lost, so make sure you keep it somewhere safe;
- Hardware wallets. These are sturdy wallets, usually the size of a USB drive, that are waterproof, virus-proof, and generally more efficient. They might be more expensive based on their features, such as a secure element (EAL6+ rated) and verified open source status;
- Physical coins. This type of gift is suitable for someone who values physical, fancier gifts, as these products are usually custom-printed on 3D printers using metal or plastic. However, the receiver must transfer the coins to an offline storage since keeping the crypto on a physical coin is unsafe;
What are the taxes that come with crypto gifts?
Generally, cryptocurrency gifts don’t require tax filing unless they exceed the allowance. At the same time, you should alert the IRS (Internal Revenue Service) when the other person sells the asset, and the result is capital gain or loss. If the transaction occurs within one year of the gift, the tax is ordinary income, but if the person makes a short-term capital gain, the tax is capital gains. Losses will also differ, since the value of cryptocurrency changes so quickly and drastically, which is why it might be ideal to consult a lawyer before gifting crypto to understand all the intricacies of potential taxation.
What about donating cryptocurrency to a charity?
Donating in general is a great act of kindness and contribution to special causes, so making it in crypto doesn’t minimize its value or purpose. However, the process might be a bit tacky under current donation systems, as not all charities accept crypto.
Luckily, a growing number of institutions are making efforts to introduce channels through which people can donate cryptocurrency to any cause. Moreover, the donor benefits from being exempt from capital gains tax when they sell their assets. Make sure to learn about the conditions that apply to cryptocurrency you held for more or less than a year, since deducting the fair market value is different for each case.
What kind of coins can you donate to charities?
The type of coin you donate shouldn’t really matter as long as you offer it for improving someone’s life or a pet’s cause. Usually, Bitcoin is the most donated coin because it’s also the most accessible, and people can access it globally. Stablecoins are also among people’s preferred options for donations because their value doesn’t change drastically with volatility, unlike regular crypto.
Interestingly, meme coins have generated significant donations for special causes. Assets like Dogecoin have become an efficient donation instrument since institutions like The Giving Block have made it possible to accept them.
Meme coins and charitable efforts
Charitable efforts through meme coins have become a staple in decentralized ecosystems, proving how even so-called useless coins can contribute to the world. For example, the case of Peanut the squirrel sparked a movement, with people creating a meme coin in honor of the sad passing of the beloved pet and donating all the proceeds to animal welfare organizations. The coin was created on the Solana blockchain, making it a reputable option for developing meme coins and providing them with a real-world use case.
Conclusion
Gifting cryptocurrency is possible and even recommended in some cases, as it can help with tax reporting. Thus, if you want to gift crypto to a friend to introduce them to these financial assets, you only need to choose the best transfer method for both of you. At the same time, donating to a cause or charity is a good idea, as donations are tax-exempt and help communities flourish.
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