Methodology and Terminology

The creation of this report involved a variety of methods. We brought together an interdisciplinary team of public policy scholars, nonprofit experts, and attorneys to create an international survey on how 10 countries across five different continents regulate virtual currency donations: Australia, Bermuda, Canada, Denmark, Malta, Singapore, South Africa, Switzerland, United Kingdom, and the United States.¹ We engaged outside legal counsel and examined a wide range of primary and secondary sources, including regulation, scholarship, and legal commentary. Specifically, we consistently examined a series of detailed research questions across seven categories:

1. Use cases
2. Acceptance of donations of virtual currency
3. Asset class, valuation, and tax issues
4. Anti-money laundering (AML) and combating the financing of terrorism (CFT) measures
5. Holding/liquidation
6. Risks
7. Other relevant (or emerging) legal issues, questions, or regulatory measures

Additionally, we researched and quantified existing use cases of virtual currency donations, namely through public sources of reporting and financial documents. New America drew upon its existing expertise, staff, and resources in areas such as blockchain, nonprofit regulation, tax law, and civil society, including past interactions with policymakers in foreign ministries, tax authorities, and securities agencies across a number of countries. We also conferred with select outside experts and showed them earlier drafts of our findings.²

This report assumes a fair degree of familiarity with terminology around taxation and virtual currencies. We generally use the term "tax-benefited" to mean the organization, and/or donations to it, offers some advantage to tax liability, such as tax exemption or an allowable donation deduction or credit on a tax return for the donor.³ Consistent with the European Union’s Fifth Anti-Money Laundering Directive (AMLD5), we use the term “virtual currency” (e.g. in lieu of “digital currency,” “cryptocurrency,” or “token”), broadly defined as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency but is accepted by natural or legal persons as a means of exchange, and which can be transferred, stored or traded electronically.”⁴ Appendix 1 contains a list of key terminology pertaining to virtual currency technology. Throughout, we use the term civil society organizations (CSOs) expansively, consistent with the U.N. Development Program as including “all non-market and non-state organizations outside of the family in which people organize themselves to pursue shared interests in the public domain,"⁵ but our primary research focus is on organizations that are tax-exempt and offer some tax benefit to donors. While we refer to "CSOs" and "charities" often interchangeably in this report, we recognize that the term "CSOs" also includes some organizations for which donations might not normally be tax benefited, such as labor unions and professional or trade associations. The precise definition, regulation, and tax benefits of CSOs differ among nations.⁶