Could Cryptocurrency Reduce Misappropriation of Charitable Donations?

Executive Brief

Misappropriation of funds is a serious problem in the world of charitable donations, in many cases under 5% reach the intended recipients. Could cryptocurrency help increase that amount and help direct these funds to where they are really needed? There are some advantages to public blockchains and cryptocurrency that could help push that number in the right direction. 

Read the full story below. 

Widespread adoption of cryptocurrency by non profit organizations could help them provide a level of transparency and accountability which traditional currencies and financial services will never match. Since all transactions are recorded on a cryptocurrency's publicly viewable blockchain, any individual would be able to monitor the financial activity of non-profit funding. Because of this increased transparency, organizations misleading donors as to where their money is going would find it much more difficult to deceive if both parties used only cryptocurrency.

Non-profit fund misappropriation is a serious problem, particularly affecting the people that the donations were intended to help. According to a report done by the Tampa Bay Times and Center for Investigative Reporting, America's 50 worst charities paid solicitors 935.6 million dollars over a 10 year period, while only 43.9 million went to direct cash aid. This amounts to only five percent of incoming donations that are actually making it to the people who need it. To make matters worse, these charities often take advantage of groups with an upstanding reputation such as veterans, firefighters, and police. Other groups regularly exploited for profit include women, children, as well as the sick and disabled.

In 2014 Americans gave 358.38 billion (about 2% of total GDP) to charity. With generosity of this scale, it's time for donors to start demanding more efficiency, accountability, and transparency, with lower administrative costs. If there were an easy way for donors to trace money they've given, it could ensure that the most generous in our society can provide even better assistance to those in need.

If more charities started accepting cryptocurrency, they could provide far superior transparency and accountability to their donors. Since all cryptocurrency transactions are recorded on the blockchain (a list of transactions that have occurred on the network), the donor can use a block explorer on any internet browser to trace their donation and see where it ends up. Some charities have already started accepting bitcoin, which is currently the most popular digital currency. However the majority of charities currently accepting are hesitant to test its full potential, avoiding perceived volatility, and opting for immediate conversion to fiat. This will eventually change when everyone begins accepting cryptocurrency and the charity begins to pay for all expenses using it.

Non profit organizations with nothing to hide will gladly accept the opportunity to publicly prove how many people they help, and show donors the impact their money can have. Their shadowy counterparts who exploit the misfortune of others, will likely remain in fiat, as publicly viewable records of their dirty dealings would certainly be bad for business.

Author: Brandon Cheliak

Education Director for DNotes and co-founder of DNotesEDU

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