July 08, 2014

Banking on Bitcoin: Nonprofit Success Stories Start to Emerge

Jim Urquhart/Reuters/Newscom

When representatives from alternative, Internet-based currencies like NobleCoin began pitching the Water Project last year, they met plenty of skepticism. Peter Chasse, founder and president of the nonprofit, knew little about how such currencies functioned.

A self-described tech geek, he set about doing his research. By January, the Water Project had an account with the web platform Coinbase and was accepting donations in Bitcoins, a decentralized, digital currency exchanged on the Internet without an intermediary like a bank.

Since then, the nonprofit, which is dedicated to creating access to clean water in remote corners of Africa, has raised more than $30,000 in Bitcoins, all of it new revenue, Mr. Chasse says. The donated currency is immediately converted into dollars and recorded as a noncash gift, much like stock would be treated.

"It is really a no-brainer to accept it," Mr. Chasse says.

Bitcoin’s potential in philanthropy has been a topic of conjecture almost since its inception five years ago. Advocates eagerly cite advantages including low- or no-cost transactions and the ability to engage people otherwise excluded from global financial systems.

While tangible examples of Bitcoin’s use have started to emerge, many charities remain wary or don’t understand how to use it.

"It will be a game changer," Mr. Chasse says. "I think how it plays out in the nonprofit sector—and whether the nonprofit sector once again comes up 10 years behind everyone else or leads—is the open question at this point."

The Capital Area Food Bank of Texas, in Austin, has received less than $1,000 worth of Bitcoin donations since the nonprofit began accepting the digital currency in February, says Alan Robinson, chief financial officer. The nonprofit is also using Coinbase, and the first $1-million in transactions is free. Thereafter, there is a 1-percent charge, still less than typical credit-card charges for merchants. The currency is one more tool donors can use in addition to cash, checks, debit cards, and credit cards, he says.

"We see it as a potential growth stream," Mr. Robinson says. "It is not a lot yet, but we need to have it in place so if it becomes more accepted that we have it available and it is part of our routine."

The Women’s Annex Foundation, which promotes digital literacy among young women in Afghanistan and provides a platform by which they can earn money as bloggers, began paying its users in Bitcoins earlier this year. For women in some countries, establishing a bank account is difficult, according to Fereshteh Forough, a co-founder of the nonprofit. Online payment systems like PayPal don’t operate in Afghanistan. Bitcoin transactions, meanwhile, require only an Internet connection and can be conducted within the privacy of a house or school.

In November, more than 1,000 Bitcoins, worth about $1-million, were raised for more than 30 charities during Bitcoin Black Friday, a play on the traditional kick-off to the holiday retail shopping season, says Connie Gallippi, founder and executive director of the BitGive Foundation. The foundation helps nonprofits start Bitcoin campaigns and has long-term plans to grow a Bitcoin endowment to fund charitable causes.

There has been no stampede among nonprofits to adopt the use of Bitcoin, enthusiasts acknowledge. For many potential users, it remains shrouded in mystery. Some critics question the stability of the currency, which peaked in value at about $1,200 per Bitcoin in late 2013 only to fall below $400 in April. Currently, its value hovers around $600. Others say Bitcoins can be used by arms traffickers and other criminals to launder money. In March, popular Bitcoin exchange Mt. Gox folded after hundreds of millions of dollars of Bitcoins went missing.

Still, the early lurching and false starts are not unlike those experienced by other new technologies, including the Internet, advocates say. And the potential benefits are enormous.

"We are talking about philanthropy where donors want 100 percent of their money to go to the cause that they are giving to," says Fred Wilson, a venture capitalist and co-founder of Union Square Ventures, a Coinbase investor.

Internet-based fundraising is already driving down overhead costs for nonprofits, Mr. Wilson says, citing platforms like Crowd­rise and Credit-card fees remain a reality for charities, but Bitcoin, Mr. Wilson says, could help bring that overhead cost down to near zero.

Mr. Wilson is scheduled to deliver a lecture at New York University on July 14 that is designed in part to help educate nonprofit professionals about its use.

"It is going to take time," Mr. Wilson says. "It is not going to be an overnight success. It is like the Internet. They need to be committed to it. They need to be patient."

Send an e-mail to Megan O’Neil.