The mainstream has taken a growing interest in cryptocurrency as the price of Bitcoin (BTC) continues to reach all-time highs. To put this interest into perspective, researchers at the Cambridge Centre for Alternative Finance recently found that 101 million people across the globe currently hold Bitcoin and other digital assets. The report states that in 2018, findings estimated the number of identity-verified digital asset users to be about 35 million globally.
With such growth underway, it shouldn’t come as a surprise that crypto holders would get the idea of gifting cryptocurrency this holiday season. Social distancing requirements amid the pandemic have led to virtual holiday gatherings and digital gifts being sent across various geographies.
Yet, while the idea of gifting cryptocurrency to friends and family may sound appealing, there are considerations to take into account before sending them to your loved ones — especially newcomers.
Education comes first
Bill Zielke, chief marketing officer at BitPay, a leading Bitcoin (BTC) payment service provider, told Cointelegraph that sending crypto person-to-person has always been popular, noting that the firm expects more consumers to do so this holiday given the bullish market. “While Bitcoin remains the crypto of choice for purchases, XRP and Ether (ETH) have dramatically increased in popularity, representing 8% and 7% of BitPay’s transactions respectively,” he said.
However, when it comes to sending cryptocurrency to new users, Zielke explained that education is key, as there are many coins and several ways to store them. There are also questions such as whether the wallet being used is open-source and noncustodial. Perhaps more importantly, the person that has received crypto should know what these terms mean.
The saying, “Not your keys, not your Bitcoin” may come to mind here. While hardware and paper wallets are known for being more secure forms of cryptocurrency storage, there are huge responsibilities that come along with these mechanisms.
Dave Jevans, CEO of blockchain intelligence firm CipherTrace, told Cointelegraph that when sending crypto to a beginner, it’s critical to ensure they understand this basic rule: “Your value, your responsibility.” Jevans shared that it’s essential for newcomers to comprehend the importance of safeguarding their private key, recovery phrase storage, and having a secure place to store the crypto once it has been received, or else there is the risk of losing access to funds.
For those considering a more mainstream approach, “Crypto Wendy O,” a crypto YouTuber, told Cointelegraph that she recommends new users to set up an account on a well-known exchange:
“I don’t like the idea of a newcomer setting up a ledger or paper wallet, as this is very unrealistic and complicated. If a user loses their private keys, it’s gone in these instances. With Coinbase or Celsius for example the crypto can be accessed easier.”
However, despite Coinbase being one of the most popular digital asset platforms in the United States, there are also downsides to the service. Coinbase and other popular exchanges like Binance have been experiencing technical issues as the price of Bitcoin climbs higher. While regular crypto users may be aware of these service failures, this could be very concerning for newcomers.
lternative ways to gift crypto
While sending cryptocurrency directly to another user via a wallet address may be the most common way of gifting crypto, alternatives such as gift cards and ATM vouchers should also be considered.
Zielke shared that BitPay has seen a spike in users turning crypto into gift cards. “During the months of November and December, gift card purchases using crypto have been our top-performing category,” he said. With well-known retailers like Amazon accepting gift cards purchased with Bitcoin through several native crytpo services, this could be a great option for gifting crypto to newcomers.
Additionally, Jevans noted that crypto ATMs such as Coinme can provide depositors with vouchers redeemable by anyone. While this may make a great gift choice, Jevans remarked that depositing $250 or more will require Know Your Customer verification for most Bitcoin ATMs in the United States.
Crypto donations are also on the rise
Aside from giving cryptocurrency to friends and family, crypto donations are also a great way to give back this holiday season. Interestingly enough, this year has seen a number of new crypto-related fundraising opportunities from mainstream charities.
For example, “Bitcoin Tuesday,” which was scheduled for Dec. 1 this year, encouraged users to make cryptocurrency donations to organizations such as Save the Children, No Kid Hungry and the American Cancer Society. The Giving Block, the crypto donations company behind the virtual event, noted that this year’s celebration was an order of magnitude bigger than last year’s. Most recently, The Giving Block partnered with The American Cancer Society to create the first-ever cancer research fund based exclusively on crypto donations.
Alex Wilson, co-founder of The Giving Block, told Cointelegraph that donating cryptocurrency creates a virtuous cycle of giving, noting that higher market prices often result in more donations, leading to mainstream adoption. “It’s particularly beneficial this year because crypto asset prices have risen so dramatically,” he said.
It’s also notable that The Salvation Army is accepting cryptocurrency donations this Christmas, launching its first-ever “crypto kettle” in the United States’ west. This unique initiative allows donors to give Bitcoin and Ether directly to The Salvation Army, one of the largest charities in the world. In a recent blog post, the organization noted that these transactions are easy to make, and most importantly, come with tax benefits.
The tax benefits associated with crypto donations are certainly a consideration to be taken into account. According to Taxbit’s “Cryptocurrency Gifts and Donations Tax Guide,” donating cryptocurrency to a qualified charitable organization is not a taxable event. The guide further notes that donors will not realize income, gain or loss from making a donation. Moreover, if a donor has held cryptocurrency for more than a year prior to the donation, they will be eligible for the itemized charitable deduction for the fair market value of the cryptocurrency at the time of contribution, in addition to not incurring a taxable gain on an appreciated asset.
Justin Woodward, a tax attorney at TaxBit, told Cointelegraph that there are tremendous tax incentives to donating cryptocurrency through an unrealized gain position. “Donating appreciated capital assets to a qualified charity allows you to avoid paying capital gains on the eventual sale,” he said.
Next year may be crypto’s tipping point
While there are clearly a number of ways to gift crypto this year, education is still key when it comes to deciding how to give back. Moreover, it’s apparent that the widespread use of cryptocurrency is still very much underway. As such, Zielke from BitPay remarked that 2021 may be the tipping point for crypto to really “become a cool gift to receive for special occasions.”
Title: Gifting crypto to loved ones this holiday? Educate them first
Sourced From: cointelegraph.com/news/gifting-crypto-to-loved-ones-this-holiday-educate-them-first
Published Date: Wed, 23 Dec 2020 17:47:00 +0000
Gifting crypto to loved ones this holiday? Educate them first
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