Charities must understand the implications of accepting crypto donations and should conduct risk assessments before doing so, new guidance has cautioned.
The Crypto Fundraising Guide, published by the Fundraising Regulator (FR) on 16 October, urged organisations to gauge risk before taking crypto donations, and to evaluate whether such donations align with their values.
Trustees should make a “strategic decision” over the acceptability of crypto prior to any donations being taken, it added.
Donations being linked to financial crime or to individuals targeted with sanctions, or connected to proscribed organisations, were among potential dangers highlighted in the FR’s guidance.
The report urged charities to understand the role of third-party providers, such as online fundraising platforms, to assess compatibility with donation acceptance policies.
“Make sure you, and any third-party services you use for the purposes of receiving and processing crypto donations, are equipped to carry out adequate due diligence on your behalf,” it said.
The FR urged organisations to be open with other donors about decisions around accepting crypto or “digital asset[s]”.
“Our message is simple,” the FR stated. “Be proactive in deciding whether crypto is right for your organisation, understand and manage the risks, and put the right policies, due diligence, systems and training in place.”
The FR emphasised that these protective measures should be taken in advance of any crypto donation being received, to avoid pressurised decision-making.
‘Stronger due diligence’ required for crypto assets
Crypto assets, which are not recognised as UK currency nor eligible for gift aid, carry higher risk and require stronger due diligence than other donations, the FR said.
It noted that individual donations may require bespoke decisions, even when a charity has made a strategic choice to accept crypto.
“Always keep adequate records of crypto donations, whether they are received directly or indirectly,” the regulator advised.
Paul Winyard, FR policy director, said charities remain responsible for ensuring adequate due diligence is carried out, including on third-party providers.
“You should also check that [such] services meet applicable legal and regulatory requirements,” he wrote in a blog introducing the guidance.
“Even if you do not plan to accept crypto, you should become familiar with the [new] guide,” Winyard added. “A crypto donation may be offered unexpectedly, so you need to be ready to decide whether to accept, refuse or return it in line with your policies and the code.
Charities ‘exposed to harm’ without risk assessment
Charities that do not carry out a risk assessment before accepting crypto donations could be exposed to harm, the FR stated.
“Always document your risk assessment in writing,” it advised, explaining this would be key to any complaint investigation.
Donor identity was another risk identified in the guidance, which warned that a donation may not be easily linked to an identifiable person.
Potential donor anonymity could, for instance, increase the risk of charities accepting money connected to financial crime such as sanctions evasion or fraud.
Environmental or social impacts – for instance, crypto’s carbon footprint – were other risk factors flagged by the FR, which advised charities to consider whether donations are consistent with their purposes and values.
