First Principles of Civil Society

To achieve the right balance between encouraging private support for public problem-solving and ensuring that organizations—and the funds they raise and spend—are indeed serving the public interest, vibrant democracies regulate civil society organizations through tax exemption and beyond. Civil society is also subject to a variety of generally applicable regulations and specific laws, for example, about the registration of new corporate entities or the strictures of employment law. Across the world, many legislatures have gone beyond simply encouraging charitable donations: most effectively subsidize them, for example by allowing donors to receive a tax benefit and exempting CSOs from taxation. In return, lawmakers typically require CSOs to follow certain practices of transparency, accountability, AML compliance, and reporting. We conclude that policymakers can develop regulatory frameworks that maintain each of these principles without halting the growth of virtual currencies and associated donations.

In modern charitable giving, the vast majority of private capital that has been donated in support of public interest issues has been in the form of cash donations (fiat donations via checks, wire transfers, online donations, etc.). In addition, donations of non-cash assets—stocks, land, art, etc.—also can be a source of funding for some CSOs. In addition, new philanthropic models have developed, such as fiscal sponsorship arrangements, that permit support of a broader array of charitable projects, including those housed in non-charities or in foreign entities, in a tax advantageous way.

Against that backdrop, this project is designed to help regulators and donors better understand how best to apply existing rules governing charitable giving amid the new wealth and opportunities presented by virtual currencies and emerging technologies.¹