It’s a strange moment in time when a digital artist called Beeple (AKA Michael Winkelmann), TV host Ellen DeGeneres and soccer legend Pelé find themselves linked to a pioneering form of philanthropy that defies easy explanation.
But the three very different celebrities are all part of the brave new world of using cryptocurrency and non-fungible tokens (NFTs) to create a new way of giving that offers a viable way for not for profits to grow their donor pool.
In the past 12 months, there has been notable growth in the use of NFTs – and cryptocurrency more generally – as a means of donation, culminating in Australia last month with international medical humanitarian organisation Médecins Sans Frontieres/Doctors Without Borders’ (MSF) announcement that it had received a $4.9 million gift from a NFT digital art project.
The uptick in donor activity around these new kinds of transactions has started a discussion about the possibilities of them becoming a more established donation stream in the philanthropic ecosystem.
Jennifer Tierney, MSF Australia Executive Director, saw a similar trend some years ago in her previous role.
“When I worked at MSF USA 15 years ago, there was a similar feeling from the gaming tech community,’’ she said. “They’re both really enthusiastic online, irreverent, and innovative.’’
It’s important to distinguish the difference between cryptocurrency and NFTs, even though both use blockchain technology and both are having their moment: cryptocurrencies are fungible tokens and have a universal value. Non-fungible tokens have no value unless art, music, tweets and memes or some other data is stored on it.
That’s when they can be auctioned off, and the proceeds donated. One of Beeple’s recent NFT’s was sold for $ (US) 6 million with the proceeds going to the Open Earth Foundation. TV show host Ellen auctioned an NFT and raised $ (US) 33,000 for charity World Central Kitchen in April and Pelé plans to auction his own NFT trading cards with 90 per cent of the proceeds going to his foundation. In May, Rolling Stones’ frontman Mick Jagger auctioned an NFT that included a 30-second visual with the background music of a song recently released by Jagger and Foo Fighters’ Dave Grohl. It raised $ (US) 50,000 to support independent music venues.
Despite cryptocurrency’s growing profile, it’s still a novel element in international giving. Only four months ago, The New York Times highlighted a Bitcoin donation of $ (US) 5 million to the Wharton business school at the University of Pennsylvania. The ‘currency’ of the donation became newsworthy.
And there’s not a long list of not-for-profits who are either interested or able to accept cryptocurrency, let alone NFTs. Save The Children’s international arm has been accepting cryptocurrency donations since 2013, but its Australian operation is yet to do so.
Part of the problem for any not-for-profit is the volatility of cryptocurrency itself. It can change value quickly and often with drastic results. There’s also the issue of finding a clearing house or broker to act as conduit between the donor and the recipient to mitigate that risk factor.
That’s where the US-based The Giving Block comes in. It acts as the “converter’’ that enables the original donation to become useable for not for profits. MSF used The Giving Block for its NFT gift earlier this year. As Jennifer Tierney explained it, The Giving Block also “…essentially helped to decrease the volatility’’ around the transaction.
MSF Australia came to the idea after a staff member interested in cryptocurrency raised the possibility with colleagues. Now, Jennifer said, the success of the transaction has piqued interest across the MSF network. Since March, MSF has worked with The Giving Block on more than a dozen transactions.
Last month’s donation to MSF – understood to be the largest known cryptocurrency charity donation realised from an NFT project – was from an auction of NFT artworks. The donation was made in Ethereum (ETH), which The Giving Block processed into Australian dollars.
One of the key reassurances in the MSF transaction was the opportunity to have a conversation with the donor, and to provide a comforting level of transparency.
“We want to make sure we know where the money is coming from…[to] have a line of sight, that it's it from legitimate sources, even if they are anonymous,’’ Jennifer said. “I was able to have a conversation with the donor and they were aligned with our values.’’
Alex Wilson, Co-Founder of The Giving Block, has observed the changes in giving across the globe. “NFTs have had a huge impact on the charitable sector. We see a huge increase in donations related to NFPs,’’ he said recently.
But the charities and not-for-profits have to be set up to accept cryptocurrency to enable them to process the NFT too. The added incentive in Australia is that cryptocurrency donations are exempt from capital gains tax, which enables donors to maximise the value of their contributions.
Jennifer believes that cryptocurrency and NFTs represent one of the most exciting developments in philanthropy, alongside the generational transfer of wealth.
“[The NFT donation] was one of the highlights of my year,’’ Jennifer said. “It was pretty thrilling.’’