"As a rule, nonprofits are more money-conscious than business enterprises are," wrote the great management author Peter Drucker.
Nonprofits could always use more money than they have available, and it is quite hard to raise money. While money is on everyone's mind within nonprofits, the risks of holding larger amounts of money in cash or other "safe" assets like bonds are often not. If you are a board member, a CFO or a CEO of a nonprofit, you owe it to your mission to study Bitcoin. It is a promising technology that provides a hedge against the uncertain economic environment we find ourselves in these days.
Let me share with you three reasons why your nonprofit should be seriously considering utilizing Bitcoin.
1. Larger Holes Are Appearing In Your Valuable Safety Net
Nonprofits are prudent to have savings. Most nonprofit have between three months and up to one year of savings set aside. Depending on your size, these savings are easily in the millions of dollars.
Those savings move into bonds and other supposedly safe assets that can be changed into cash if need be. Undoubtedly, one needs to be prudent with donors' money, but one also needs to understand that holding vast amounts of cash and bonds is a considerable risk in this day and age. It used to be a safe bet. But it has become the opposite, with around 27 percent of the world's investment-grade debt yielding negative interest.
This is the result of the unprecedented monetary expansion in the United States and around the world. In response to COVID-19, the Federal Reserve has created an unprecedented 20 percent of all existing dollars in a single year.
Private and public debt is exploding and inflation is picking up, and it will continue to rise in many sectors (especially in certain assets like stocks and real estate). In contrast, other sectors will experience deflation since the economy is nowhere close to its pre-COVID-19 levels. This dynamic will create inequality and many economic losers.
Don't let your nonprofit be one of those losers by holding melting assets like cash or bonds. Hedge your bets and own some bitcoin. Learn from businesses like MicroStrategy or Square, which have invested $1.125 billion and $50 million into bitcoin, respectively, as part of their strategies to preserve capital.
2. Don't Miss Out on Over 100 Million Potential Donors
For the first since the inception of cryptocurrencies, their market cap has reached $1 trillion. The vast majority of that is represented by bitcoin. According to a Cambridge University study from last year, the estimated user base for cryptocurrencies — of which bitcoin is the largest — is around 101 million.
This number is growing by the day, and explosively so. There is no reason why your nonprofit should not open its accounts to receiving bitcoin or other crypto donations. Even if a nonprofit does not want to hold bitcoin as a reserve asset, it should take donations in cryptocurrencies, which you can exchange for fiat money (government-issued money) instantaneously. Services like the Giving Block are fantastic vehicles that make onboarding easy. Coinbase and other exchanges also make it possible to receive crypto donations.
3. Save Money On International Wire Transfers And Pay Your Staff Abroad Efficiently
We pay around eight of our staffers with bitcoin and have dozens more receive reimbursements in bitcoin.
In 2021, the legacy banking system still charges outrageous fees for merely updating some digital numbers in an account. One can circumvent this with bitcoin. Bitcoin's fees are a fraction of the typical international transaction fees. If you hold bitcoin yourself, you can even set your own fees in light of the transaction's speed. While fees are likely to increase due to the growth of the transaction volume on the Bitcoin network, innovations like the Lightning Network overcome this problem.
Nonprofit CFOs ought to study Bitcoin and its capabilities to save valuable organizational resources. Nonprofits don't have to deal with bitcoin's volatility, since one can buy bitcoin on the spot and send it immediately to your staffers or volunteers. Once received, the person can do what they want with those payments, like transferring them to local currencies or holding bitcoin as part of their retirement plans.
After 13 years, Bitcoin is here to stay, and it is a powerful tool that millions of users leverage due to its superior characteristics compared to gold or ever-inflating government money.
Nonprofits leaders think about money a fair amount, but they don't think about the risks that government paper money brings. Bitcoin offers a safe haven and opportunity for non-profits to become less concerned about capital depletion through monetary expansion and an increasingly volatile macroeconomic environment. Institutions and businesses are waking up to bitcoin and investing heavily. It would be a missed opportunity if the philanthropic sector does not jump on this and invest in a safe store of value and the future of money.
This is a guest post by Wolf von Laer. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.