The mainstream has shown a growing interest in cryptocurrency as the price of Bitcoin (BTC) continues to hit all-time highs. To put that interest in perspective, researchers at the Cambridge Center for Alternative Finance recently found that 101 million people around the world currently own Bitcoin and other digital assets. According to the report, the 2018 results estimated the number of identity-verified users of digital assets worldwide to be around 35 million.
Given this growth, it should come as no surprise that this Christmas season, crypto owners come up with the idea of giving away cryptocurrency. The demands for social distancing amid the pandemic have resulted in virtual holiday gatherings and digital gifts being sent out in different regions.
While the idea of gifting cryptocurrency to friends and family members sounds appealing, there are a few considerations to consider before sending it to loved ones – especially newbies.
Education comes first
Bill Zielke, chief marketing officer at BitPay, a leading Bitcoin (BTC) payment service company, told Cointelegraph that person-to-person sending crypto has always been popular, noting that given the bullish market, the company expects more consumers do so on this vacation. “While Bitcoin remains the crypto of choice for purchases, XRP and Ether (ETH) have increased dramatically in popularity, accounting for 8% and 7% of BitPay transactions, respectively,” he said.
However, when it comes to sending cryptocurrency to new users, Zielke explained that education is key as there are many coins and different ways to store them. There are also questions such as B. whether the wallet used is open source and not subject to custody. Perhaps more importantly, the person who received crypto should know what these terms mean.
The adage “Not your keys, not your Bitcoin” may come to mind here. While hardware and paper wallets are known to be more secure forms of storing cryptocurrencies, there are enormous responsibilities associated with these mechanisms.
Dave Jevans, CEO of blockchain intelligence agency CipherTrace, told Cointelegraph that when sending crypto to beginners, it is important to make sure they understand this basic rule: “Your worth, your responsibility.” Jevans shared that it is important for newcomers to understand the importance of protecting their private key, storing recovery phrases, and keeping the crypto safe after receiving it, otherwise there is a risk of losing access to funds.
For those considering a more general approach, Crypto Wendy O, a crypto YouTuber, told Cointelegraph that she recommends that new users create an account on a well-known exchange:
“I don’t like the idea of a newbie setting up a ledger or a paper wallet as this is very unrealistic and complicated. In these cases, if a user loses their private key, it is no longer there. With Coinbase or Celsius, for example, it can be easier the crypto can be accessed. “
While Coinbase is one of the most popular digital asset platforms in the US, the service has its downsides too. Coinbase and other popular exchanges like Binance had technical issues as the price of Bitcoin went higher. While ordinary crypto users may be aware of these service errors, it can be very worrying for newbies.
Alternative ways to give away crypto
While sending cryptocurrency directly to another user through a wallet address is the most common method of gifting crypto, alternatives like gift cards and ATM coupons should also be considered.
Zielke said BitPay has seen an increase in users turning crypto into gift cards. “During the months of November and December, gift card purchases using crypto were our top performing category,” he said. With well-known retailers like Amazon accepting gift cards purchased with Bitcoin through several native Crytpo services, this could be a great option for gifting newbies with crypto.
In addition, Jevans noted that crypto ATMs like Coinme can provide depositors with coupons that can be redeemed by anyone. While this may be a good gift choice, Jevans noted that most Bitcoin ATMs in the US require confirmation from Know Your Customer in order to deposit $ 250 or more.
Crypto donations are also on the rise
Not only do cryptocurrencies give away cryptocurrency to friends and family, they are also a great way to give back this holiday season. Interestingly, there were a number of new crypto-related fundraisers this year from nonprofits.
For example, Bitcoin Tuesday, scheduled for December 1 of this year, encouraged users to make cryptocurrency donations to organizations like Save the Children, No Kid Hungry, and the American Cancer Society. The Giving Block, the crypto donation company behind the virtual event, noted that this year’s celebration was an order of magnitude larger than last year. Most recently, The Giving Block, in partnership with the American Cancer Society, set up the first cancer research fund based entirely on crypto donations.
Alex Wilson, co-founder of The Giving Block, told Cointelegraph that donating cryptocurrency creates a positive cycle of giving. He found that higher market prices often lead to more donations and general acceptance. “This is particularly beneficial this year as the prices of crypto assets have increased so dramatically,” he said.
It’s also noteworthy that the Salvation Army is accepting cryptocurrency donations this Christmas and is launching its first “crypto kettle” in the western United States. This unique initiative enables donors to give Bitcoin and Ether directly to the Salvation Army, one of the largest charities in the world. In a recent blog post, the organization found that these transactions are easy to perform and most importantly, they come with tax benefits.
The tax benefits associated with crypto donations are certainly a consideration to consider. According to Taxbits “Cryptocurrency Gifts and Donations Tax Guide,” donating cryptocurrency to a qualified non-profit organization is not a taxable event. The guide also states that donors receive no income, profit or loss from a donation. Additionally, if a donor held cryptocurrency for more than a year prior to donating, they will be entitled to the recognized charitable allowance for the fair market value of the cryptocurrency at the time of contribution and will not make any taxable profit on an estimated asset.
Justin Woodward, tax attorney at TaxBit, told Cointelegraph that there are huge tax incentives for donating cryptocurrency through an unrealized profit position. “When you donate valued capital to a qualified charity, you can avoid paying capital gains on eventual sales,” he said.
Next year could be the turning point for crypto
While there are clearly a number of ways to give away crypto this year, education is still key when it comes to deciding how to give something back. In addition, it is evident that the widespread use of cryptocurrency is still very advanced. For this reason, BitPay’s Zielke noted that 2021 could be the turning point for crypto to really be “a cool gift for special occasions”.