/cryptocurrency

News and resources on digital currencies, crypto assets and crypto exchanges worldwide.
Philanthropy is facing a ‘triple squeeze’ and digital assets can help - Citi

Philanthropy is facing a ‘triple squeeze’ and digital assets can help - Citi

Citibank’s recent report ‘Philanthropy and the Global Economy’ has found that digital assets can be the future of philanthropy in wake of the cost of living crisis. Amy Thompson, report author, and Ronit Ghose, global head of future of finance at Citi, sat down with Finextra to discuss the significance of this report in light of the cost of living crisis.

Last year, Citi estimated that $550 billion is annually donated to charities worldwide, and Thompson argues this could go even further if philanthropic organisations utilised all the assets available to them.

Philanthropy has seen a shrink in its donor base in recent years, leading to a greater reliance on higher-value donations. Looking into 2023, Citi’s report gives insight into how philanthropy should be adapted for charities to continue supporting their beneficiaries.

Thompson describes a ‘triple squeeze’ on the sector: “The cost of living crisis is going to impact donors in that they might be less able to and less willing to give, so there will be a squeeze on the level of fundraising and the value of donations. The second element of the triple squeeze is that costs for charities go up. The cost of staffing is already having an impact on the ability to fill vacancies in the sector.

“A third factor is increasing demand; the cost of living crisis is driving a need for greater availability of charitable services. We think it's coming from three different angles on the sector and presenting this huge challenge, but there is a note of optimism that philanthropy seems to always find a way.”

She expands on two major innovations laid out in the report. The first on how funders can unlock more of their assets, which could open up a further $2.4 trillion in funding, and the second on looking to digital asset donors as a novel donor base that can provide new opportunities within the global reach of philanthropy.

Digital assets present a significant new funding opportunity to increase annual philanthropic donations. The report suggests that targeting digital asset donors could catalyse a fundamental shift, leading to increased transparency in charitable operations and across the donation process. Blockchain technology involved in crypto usage allows for a certain amount of traceability that is not always present in traditional donations.



Thompson illustrates: “When funds are donated in digital assets, donors can track how those funds are spent and even set stipulations on the use of their donations. We think there's a potential to increase transparency across philanthropic organisations and through their charitable operations. The flip side of that is this transparency could come with additional power accumulated by donors, especially if they pursue the opportunity to set restrictions.”

Ghose argues that digital assets provide a novel donor base which differs from traditional patrons. He states that many who donate in crypto are young when whereas, “typically philanthropy tends to be at a global level skewed to the US, older generations and often female-driven.”

Thompson continues that crypto owners are statistically more likely to give, and give higher amounts, citing that in 2021, the average value of donation for a digital asset donor was 82 times the average value of an online donation.

Another factor that makes digital asset owners more philanthropic is their inclination towards independent organisations and decentralisation that is resonated in the nature of charities and non-profits that provide what may elsewhere be provided by the state and governmental organisations.

However, many charities do not accept digital assets at this time. Thompson posits that this is because many charities are concerned with some of the risk involved in crypto. One way around this is for charities to accept donations in crypto and immediately convert it to fiat, according to Citi.



“If you're a charity and you're accepting crypto donations, you have to think about what the existing rules are around AML, sanctions rules, and any kind of KYC that would be normal checks. Crypto comes with its own transparency, but also comes with potential risks. I say potential because it does not have to be illicit money, but every technology can be misused,” states Ghose.

Ghose touches on how humanitarian issues such as the recent crisis in Ukraine has benefited from the advantages of crypto donations. Money can be moved easily domestically, but transferring money cross-border can cause a lot of friction and lead to more expenses or sometimes bans. However with digital assets, moving money across borders suddenly becomes very easy.

Thompson adds that, “philanthropy tends to stay domestically, and cross-border charitable giving is a small percentage of total charitable giving.”

A case study highlighted in the report explores the use of field trials of blockchain-enabled cash transfers to a refugee settlement in Uganda, where people were fleeing from the war in South Sudan. The trial conducted by Mercy Corps and Binance Charity targeted 366 households of about 2,200 refugees to provide them with blockchain-enabled digital tokens that could save costs and be used by refugees in the same style as a voucher. The trial was not without obstacles, due to the lack of mobile phones and stable internet connection on-site, but determined that digital wallets could help include refugees in the financial system and keep them banked if they choose to move.

Citi’s report concludes that accepting digital asset donations could increase charitable receipts in the wake of the cost of living crisis.

Comments: (0)

Trending