Throughout the ages, there have been developments in everything we do and everywhere we go. In this modern day, these changes are more commonly seen in the world of technology. While each new development has offered benefits that can transform things for the better, they also have new challenges and risks that need to be navigated.
Some of the most recent developments in the world of technology that has led to incredible opportunities, along with new challenges to navigate are crypto assets, also known as cryptocurrencies.
The internet-savvy and eccentric billionaires among us have already made the move into the world of cryptocurrencies. In turn, the popularity of crypto assets has grown too. It’s a new technology and development, but many have seen it working for others and want to see if it could work for them and their investments too.
As the popularity and use of cryptocurrencies grow, it begins to become seen as a ‘real economy’. There are lots of signs that cryptocurrencies will become more mainstream for not only investing but also trading and moving assets. Examples of this can be seen in more detail in our other blog posts.
A recent example of how the general public has helped with a concern or issue is the war in Ukraine. It’s been reported that the Ukrainian government has raised millions of dollars through cryptocurrencies for its efforts in the war with Russia.
Could money be raised in the same way for charities?
There was another peak in interest and popularity for cryptocurrencies in the UK earlier this year. The Treasury set out its plans to make the UK a global crypto-asset technology hub. This was a huge step forward for the UK and piqued interest in the reliability and trustworthiness of crypto assets for investors in the UK.
Further to this, the treasure laid out their plans to introduce legislation to regulate a certain type of cryptocurrency. They went on to make promises to consult on regulation for cryptocurrencies as a whole in the coming months.
So, should charities in the UK be using cryptocurrencies for donations and to boost their fundraising efforts?
One of the great things about charities is that they have often been at the forefront of innovation. There are charities out there right now that are already considering crypto assets, how they could work for them and in which ways they might benefit.
It’s important to note that there are real risks when it comes to engaging with crypto assets. This is why it is so important to do your own research. While The Commission wants to help promote innovation in charities, it’s important that cryptocurrencies aren’t something that is rushed into. The world of cryptocurrencies is continuously developing and ever-changing. This means that the benefits and opportunities will increase, but so will the new challenges that need to be overcome.
So, let’s look at what crypto assets are and how they work before we go into how other charities, like yours, are using them.
What Are Crypto Assets?
Crypto assets are digital representations of values or rights. They use blockchain technology (don’t worry, we come back to this in a bit). Crypto assets are unregulated, peer-to-peer exchanges of value. These exchanges rely on encrypted digital data.
Blockchain technology (we said we would come back to it) is a shared and unchangeable record. It tracks the exchange of assets. The biggest benefit of blockchain technology is the speed at which exchanges and transactions can take place, both within the same country and overseas. This is because the information is updated instantly. This information contains details of previous transactions and where the crypto coins have come from. This cannot be easily falsified because it is shared with other crypto users. No single organisation or individual holds the key to the blockchain, which makes it incredibly secure.
However, while cryptocurrencies and blockchain technology are secure, cryptocurrencies are volatile. The value of a single crypto coin or crypto asset can increase dramatically, and then suddenly drop in value within hours. If you choose for your charity to be a holder of crypto assets, you may also face difficulties if these crypto coins or crypto assets are stolen or misused.
How Charities Are Using Crypto Assets
Currently, a relatively low number of charities in the UK are using crypto assets, However, lots of other charities are closely watching cryptocurrencies and considering the benefits of using them. With any investment opportunity and new development, it is always worthwhile being cautious and doing your own research.
Where charities are using crypto assets, they are doing so for a limited time and for a specific purpose. One example of this is to move currencies across borders where there are no reliable regulated banking services available.
We have seen the number of charities in the UK that will accept crypto coins as donations grow in recent months. However, when charities do accept crypto coins or crypto assets as donations, the charity converts them almost immediately into either regulated assets or traditional currencies.
Currently, only a small number of charities actively engage in the act of holding or trading cryptocurrencies. Meanwhile, others are thinking about ways that they can use crypto assets to further the purpose of the charity.
Interesting situations and complex questions are being raised about charities using cryptocurrencies. Here at Koda, we think this is great. We have seen how beneficial cryptocurrencies can be for individuals and organisations. It would be great if some of the amazing charities out there could receive these benefits too.
As things stand, we would give the same recommendations to charities as we do to potential investors. This is that you do your own research to make sure cryptocurrencies are the right thing for you. It is important that you evaluate the risks as well as looking at the benefits.
The world of crypto is very volatile and this means big wins can be made, but so can big losses.
If you would like to talk about how cryptocurrencies could be used by your charity, call our team. One of our core values here at Koda is education. We want to help people like you understand what crypto assets are and the benefits available, as well as the potential challenges.
It’s important that charities are careful with their money and don’t put the charity into disrepute. These are all things we can discuss and support you with.