The Charity Commission policy team has recently published a blog discussing the pros and cons of charities engaging with cryptoassets, such as cryptocurrencies.
The blog explains that while the Commission is keen to “promote innovation in charities”, there are real risks that charities face when getting involved with cryptoassets.
Currently, the Commission understands that relatively few charities are involved with cryptoassets: those that are tend to be using cryptoassets for specific reasons, such as moving currencies across borders in situations where there are no reliable regulated banking services available.
The other major use for cryptocurrencies that charities are involved with is accepting cryptocurrency donations. If charities are accepting donations in cryptoassets there are two ways to manage this: either the charities immediately convert the cryptoassets into traditional currencies (known as “fiat currencies” in the language of cryptoassets) or (in a small number of cases) charities themselves engaging in holding and trading cryptoassets. This latter option is significantly riskier, and requires charities to have in-house expertise (or to be able to outsource this management).
The main elements of risk with engaging in cryptocurrencies are the volatility of cryptoassets, the risk of charities being exposed to cybercrime, and the ability of charities to properly conduct ‘know your donor’ checks.
Trustees must carefully consider the risks and rewards of engaging with cryptoassets (undertaking the usual requirements of observing their legal duties and making decisions in line with Commission guidance), and where appreciate should consider taking professional advice.
For the full Charity Commission blog, see here.