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Follow along with Justin as he becomes crypto-literate. This blog is part 6 of 6 in this crypto education series.
They say cash is king.
The reason cash is the preferred method of payment is because it's liquid: it's the most readily tradable form of wealth.
That's because cash was created to make exchanging value easy. Back when currencies were first invented, one of the problems they were meant to solve was the double coincidence of wants necessary in barter and trade economies. If you grew tulips, for example, you would only be able to acquire things that tulip-seeking merchants offered. And if interest in tulips dwindled (which would be weird because tulips are the best kind of flower), so too would your purchasing power. With currencies, that double coincidence of wants was eliminated, because cash can be exchanged for anything.
It's natural for nonprofits to prioritize cash donations. They're focused on changing the world, and there are usually more to-dos than funds to do them with, so whatever donations come in must be liquid (or liquidated) in order to be spent furthering the mission.
That being said, cash only makes up about 10% of US wealth. This means that donation-funded organizations that don't receive non-cash contributions (or don't make it easy for donors to give them) are missing out on 90% of the wealth.
So how can nonprofits connect with the other 90%? That's what today's blog is about.
Cash vs Assets
This is by no means an exhaustive list, but non-cash assets include things like:
- Clothes 👕
- Furniture 🪑
- Household items
- Real Estate 🏠
- Cars 🚗
- Boats 🚤
- Bonds
- Tulips 🌷
- Stocks
- 401ks or IRAs
- Crypto!
Most Americans fall into the "asset rich, cash poor" category, meaning that a majority of their net worth is in things like their home, cars, and possessions. They can easily put together a couple boxes of unused belongings from the garage, and take them down to the local Goodwill or Salvation Army. At the same time, fewer than 4 out of 10 Americans can pay an unexpected $1,000 dollar expense, even though recent studies show that the median household net worth is $121,000. For most people, the thought of giving cash to an organization seems daunting!
Where the wealth is
Nonprofits and churches need cash to operate, but they cap their donors' giving potential when they only accept cash, closing themselves off from the immense amount of value in the non-cash markets.
Here are some numbers that really help paint the picture of where the US wealth is:
- $36.2 trillion dollars in the housing market
- roughly $51 trillion dollars in the stock market
- $4-$5 trillion dollars in cars (based on resale value)
- $2.07 trillion dollars in cash
Those 3 markets alone are valued at roughly $90 trillion dollars. Compare that to the total federal reserve balance of roughly $7 trillion, which includes the $2 trillion dollars of cash in circulation. Even if the money in circulation were to double or triple in the coming years, it would still be worth less than 10% of the non-cash assets in the US.
Receiving non-cash donations
For philanthropists to have the broadest giving opportunities possible, they need to be able to tap into the value of their non-cash assets. And, in order for nonprofits to reach their full potential and impact, they need to figure out how to receive those non-cash assets.
Organizations like Goodwill and the Salvation Army specialize in non-cash donations. Their business model allows them to receive items, resell them, and earn a profit that is often turned into aid for people in need. The assets that are donated and sold also keep the lights on, pay employees' salaries, and pay for the building.
That model obviously works for Goodwill and The Salvation Army. But how can nonprofits without storefronts receive non-cash donations?
Donating a home, a stock or bond, can be extremely easy and convenient.
Engiven's partner Rize MSP bridges the gap between individuals donating non-cash assets like homes, cars, or cryptocurrencies, and your organization, opening you up to a much larger source of wealth and giving. Rize plays the role of "custodian," transferring asset titles and liquidating them, so that the donation recipient can receive cash.
Some non-cash assets are a better store of value over time than cash, so Rize also offers asset storage.
Receiving crypto donations
While nonprofits can receive donations of homes and cars, these processes usually take time and energy to complete. That's because physical property is illiquid. In order to turn it into spendable cash, a buyer has to enter the picture.
The advantage of crypto is that, while it is classified as a non-cash asset (for financial and tax purposes), it also has liquidity similar to cash. Through Engiven's platform, donations can be processed electronically, and automatically exchanged for USD in the moment after the donation is made. funds are made available the same day.
Conclusion
Most nonprofits are well-adapted to fundraising and processing cash transactions, but over 90% of the US wealth is stored in non-cash assets. By creating a pathway for that wealth to travel to their organizations, directors of nonprofits are unlocking 900% more potential funding. Whereas most non-cash donations are illiquid and take time and effort to process, crypto donations can quickly be turned into cash. And finally, tulips rock. I better not get angry emails saying tulips are overrated. How. Dare. You.
