Bitcoin… Most likely you have heard of it. Maybe you have an idea about what it is. But what if a member of your church asks you, as Pastor or Treasurer, if they can contribute bitcoin to the church. How do you reply? Can it even be done? Most smaller churches are not set up to receive donations of stocks or other securities, much less something as new as bitcoin. Obviously, one does not want to turn away a legitimate contribution with no strings attached, but what is the process? To get the big question out of the way, yes, your church can accept bitcoin contributions, but it is not as simple as a member dropping a check in the offering plate or making an online contribution with a credit card. The church must be prepared to receive such contributions.
But let’s take a step back and look at what bitcoin is. Bitcoin is the most well-known virtual currency now in existence. It is sometimes referred to as cryptocurrency. It not the province of any government, but is a virtual currency used in commerce. Since it is essentially a “private” currency the value of bitcoin changes much as the value of stocks or other securities change value. In fact, the IRS does not recognize bitcoin as cash for purposes of charitable contributions. Therefore, it must be treated as a noncash gift similar to the handling of contributions of other securities. Consequently, the church should not assign a value to the contribution but simply issue a letter acknowledging the contribution.
In order to receive bitcoin and cash it in, the church or other recipient must be set up to receive the payments. This is done through the process of opening a virtual wallet though a company that offers these services. Coinbase.com is one such company. You go to their site and follow the steps to set up an account. The site is supposedly very secure, so there are a number of steps to assure that you are who you say you are. Once an account is established, you can then buy, sell, transfer, or receive bitcoin through your account. Keep in mind that that the value fluctuates so consulting with an expert might be a good idea before making any transactions. Most churches that are involved in bitcoin would likely be making withdrawals of contributions made to their account. These withdrawals can be made, having the proceeds deposited into their bank account. It is not an especially difficult process, but it is something that must be worked through. And that takes time. And of course, there are fees involved in making transactions.
So, the bottom line is the church can choose to accept contributions of bitcoin. However, it must get ready to do so by opening an account. They should also realize that there are risks involved. Bitcoin fluctuates in value and is not regulated in the way stocks and other securities are regulated. It would probably be most prudent for the church to accept the contribution and immediately convert it into cash, rather than hoping for an increase in value. This avoids the negative consequences of a decline in value which could be significant.
Have a question? Contact John Stancil.
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