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Commission: ‘Trustees should think very carefully before investing in cryptocurrency’

13 Jul 2022 News

The Charity Commission has warned trustees to tread carefully when considering investing in cryptocurrency. 

Writing in a blog on the Commission’s website, assistant director of policy Sam Jackson said there are “real risks” in engaging with cryptoassets as it is unclear how these will evolve in the future.

He advised trustees who wish to dive into the world of cryptocurrencies to document their decision-making “carefully” should a problem arise later and the regulator step in. 

‘Real risks’ 

At the moment, only a very small number of charities use cryptocurrencies in limited circumstances such as transferring currencies to countries that lack reliable and regulated banking services.

Jackson said that “there is evidence that some charities are considering whether and how they might benefit from working with cryptoassets”.

He said: “The Commission wants to help promote innovation in charities. Indeed, we encourage trustees to consider how they might change what they do, or improve the way they do it, to better deliver on their charitable purpose.

“But there are real risks in engaging with cryptoassets too, and there is much we don’t yet know about how the world of cryptoassets is likely to develop in the future, and the opportunities and risks that it may harbour.”

Recent plunges in values

Jackson advised trustees to think “very carefully before investing in cryptocurrency, evaluating the benefits and risks as they would do with any important decision about their charity”. 

“This includes taking appropriate professional advice,” he said. “It’s also important to know your donor, which can be tricky in the context of cryptoassets, as the blockchain relies on – indeed in some ways is designed to guarantee – anonymity and secrecy.

“For many, these standard considerations will lead them to err on the side of caution until more is known about the market, and there is more regulation in the UK. Recent plunges in cryptocurrency values emphasise that such caution is prudent.”

Jackson concluded by saying that recording every part of the decision-making when investing in crypto is crucial if a decision comes under scrutiny or is questioned in the future.    

He said: “Remember that if problems arise, the Commission might need to get involved, and we’ll expect to see evidence that you fulfilled your legal duties and responsibilities and did not put your charity’s assets – including its reputation – at undue risk.”

In May, the Fundraising Regulator announced that it could include guidance on charities accepting cryptocurrencies as donations when it reviews the Code of Fundraising Practice later this year.

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