Ought to universities money in on cryptocurrency donations?
In 2023, Korean online game firm WeMade pledged to donate the equal of 1 billion Korean received ($695,988) in Wemix tokens—a cryptocurrency linked to the blockchain platform of the identical title—to Seoul Nationwide College.
What appeared like a second for celebration rapidly descended into controversy, with the college finally ceasing to just accept cryptocurrency donations altogether.
So, what occurred? Shortly after the donation was made, WeMade reportedly liquidated a big share of its cash, inflicting a big forex devaluation and which means SNU’s donation was not price a lot—an issue provided that the funds had been earmarked for a particular challenge.
That wasn’t the one barrier. Beneath South Korean monetary rules, the college was additionally unable to open a company account for digital asset trade. With calls to alter the legislation unanswered, the college was left holding a risky forex it was unable to transform to money.
Now Korean regulators are reportedly contemplating permitting the nation’s universities to transform cryptocurrency for the primary time—doubtlessly opening a big new fundraising stream for the nation’s financially ailing sector.
Elsewhere, universities are already cashing in on the crypto craze, most notably within the U.S. In 2021, the College of Pennsylvania obtained $5 million in Bitcoin from an unnamed donor. A yr later, Vitalik Buterin, co-founder of Ethereum, a number one blockchain, donated the equal of $9.4 million in USDC coin to the College of Maryland to fund public well being analysis within the wake of the pandemic.
The Giving Block, a U.S.-based platform that facilitates cryptocurrency donations to nonprofit organizations, stated that the upper training sector has been certainly one of its “greatest progress areas” over the previous two years, with Washington State College and Northeastern College among the many firm’s shoppers.
“There are a number of issues driving this, just like the booming crypto market and broader mainstream adoption, however the greatest driver for colleges is just following the cash,” stated Pat Duffy, its co-founder.
With analysts suggesting widespread currencies like Bitcoin will proceed to develop in worth this yr, spurred on by newly inaugurated Donald Trump’s crypto-friendly rhetoric, universities may very well be set to profit—if they’re ready to handle the dangers that include the risky panorama.
“For donors within the U.S., the largest driver is the tax incentive,” stated Duffy. “You may skip capital features taxes on appreciated property and nonetheless get a deduction for the complete market worth.
“The donor pays no taxes on their appreciated crypto, and neither does the college. Donors throughout the nation are eliminating tens of hundreds of thousands of {dollars} in tax legal responsibility by selecting to offer with crypto, and giving bigger presents … in consequence.”
For universities, accepting cryptocurrency might also enable them to focus on their fundraising at a youthful, tech-savvy market. “They’ll entice extra individuals in the event that they settle for crypto funds,” stated Nir Kshetri, professor of administration on the College of North Carolina at Greensboro.
It’s not simply donations the place universities are capitalizing. Some, like Bentley College, have begun accepting tuition charges in cryptocurrency, with important implications for worldwide college students.
In Nigeria, for instance, changing the naira to the U.S. greenback to make payment funds is usually a difficult course of. For some, paying in decentralized cryptocurrency is less complicated and quicker, in line with Kshetri.
Nonetheless, a key threat for universities is the unpredictability of cryptocurrency markets, with fears compounded by the volatility of Bitcoin lately. Whereas the market is recovering, crashes such because the one skilled in 2022 have left a long-lasting impression and made some universities cautious.
“Proper now it’s at a peak, however who’s to say we received’t see a return to what we noticed two years in the past when the underside fell out?” cautioned Invoice Stanczykiewicz, director of the Fund Elevating College at Indiana College Indianapolis’s Lilly Household College of Philanthropy.
In line with Stanczykiewicz, greatest apply is to keep away from holding on to cryptocurrency, even whether it is predicted to extend in worth. “What we are saying to fundraisers is in the event you get crypto, flip it into your nationwide forex as rapidly as you’ll be able to,” he stated, or use a platform just like the Giving Block, which does this for you.
Nonetheless, this method isn’t common. In Paraguay, Universidad Americana is much less risk-averse than some, evaluating the market earlier than changing any cryptocurrency funds.
Universities contemplating taking place this avenue additionally want to think about the moral points, stated Stanczykiewicz, and whether or not such donations adhere to their establishment’s values.
Particularly, the environmental impression of currencies like Bitcoin is a priority for some. Nonetheless, Kshetri argued, the coin has already been mined previous to the donation—that’s, the harm has already been executed. “Simply to switch that Bitcoin from you to me consumes little or no … electrical energy,” he stated.
No matter your moral view, these interviewed for this text agreed on this: Cryptocurrency is right here to remain and, for universities, it’s merely a query of how rapidly they embrace it.
“Traditionally, it was regulatory uncertainty that made universities nervous about crypto acceptance and investing,” stated Duffy. In the present day, he continued, within the U.S., “regulatory readability and the political assist we see on each side of the aisle have cleared up these issues.”
With international locations like South Korea set to offer a regulatory inexperienced mild, too, it might not be lengthy earlier than establishments across the globe observe within the footsteps of their U.S. counterparts.