Should universities benefit from cryptocurrency donations?

In 2023, Korean video game company WeMade pledged to donate the equivalent of 1 billion Korean won in Wemix tokens – a cryptocurrency tied to the blockchain platform of the same name – to Seoul National University.

What seemed like a moment of celebration quickly turned into controversy, as the university eventually stopped accepting cryptocurrency donations altogether.

So, what happened? Shortly after the donation, WeMade reportedly liquidated a large share of its coins, causing a significant drop in the value of the coin and meaning that SNU’s donation was no longer of much value – a problem considering that the funds were earmarked for a specific project.

This was not the only obstacle. Under South Korea’s financial regulations, the university was also unable to open a corporate account to exchange virtual assets. Without responding to calls to change the law, the university remained clinging to a volatile currency that it was unable to convert into cash.

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Now the Korean organizers are It is said Considering allowing the country’s universities to transfer cryptocurrencies for the first time – potentially opening up a major new fundraising stream for the country Financially distressed sector.

Elsewhere, universities are already beginning to benefit from the cryptocurrency craze, most notably in the United States. In 2021, University of Pennsylvania It received $5m (£4m) in Bitcoin from an unnamed donor. A year later, Vitalik Buterin, co-founder of Ethereum, one of the leading blockchain companies, donated the equivalent of $9.4 million in USDC to the bank. University of MaryLand to fund public health research in the wake of the pandemic.

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The Giving Block, a US-based platform that facilitates cryptocurrency donations to non-profit organizations, said the higher education sector has been one of the “biggest areas of growth” over the past two years, with Washington State University and Northeastern University Among the company’s clients.

“There are many things driving this, such as the booming cryptocurrency market and wider mainstream adoption, but the biggest driver for schools is simply following the money,” said Pat Duffy, its co-founder.

And with analysts pointing out that popular currencies like Bitcoin will continue to grow in value this year, driven by the rhetoric of newly inaugurated cryptocurrency-friendly Donald Trump, universities could benefit — if they are prepared to manage the risks that come with a volatile landscape.

“For donors in the United States, the biggest driver is the tax incentive,” Duffy said. “You can skip capital gains taxes on appreciated assets and still get a deduction for full market value.

“The donor pays no taxes on the appreciated cryptocurrencies, and neither does the school. Donors across the country are eliminating tens of millions of dollars in tax liabilities by choosing to donate cryptocurrencies, and making larger gifts… as a result.”

For universities, accepting cryptocurrencies may also allow them to target a younger, more tech-savvy market. “They can attract more people if they accept cryptocurrency payments,” said Nir Kshetri, a professor of management at the university. North Carolina State University.

It’s not just donations that universities benefit. Some, like Bentley Universityhas begun accepting tuition fees in cryptocurrency, with major implications for international students.

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In Nigeria, for example, converting naira to US dollars to pay fees can be a complicated process. For some, paying with decentralized cryptocurrency is simpler and faster, according to Kshetri.

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However, the main risk facing universities is the unpredictability of cryptocurrency markets, with concerns exacerbated by the volatility of bitcoin in recent years. While the market is recovering, incidents like the one in 2022 have left a lasting impact and made some universities wary.

“Right now, the situation has peaked, but who can say we won’t see a return to what we saw two years ago when the bottom fell out?” warned Bill Stanczykiewicz, the school’s fundraising director Indiana University Indianapolis.

According to Stanczykiewicz, the best practice is to avoid holding cryptocurrency, even if it is expected to increase in value. “What we say to fundraising is that if you get cryptocurrencies, convert them to your national currency as quickly as you can,” he said, “or use a platform like Giving Block, which does that for you.”

However, this approach is not universal. In Paraguay, Universidad Americana is less risk averse than some, assessing the market before converting any cryptocurrency payments.

Universities considering going this route also need to consider ethical aspects, and whether such donations adhere to their institution’s values, Stanzkiewicz said.

Specifically, the environmental impact of currencies like Bitcoin is a concern for some. However, Kshetri said, the currency had already been mined before the donation, meaning the damage had already been done. “Just moving that bitcoin from you to me uses very little electricity,” he said.

Whatever your ethical view, the people interviewed for this article agreed on this: Cryptocurrency is here to stay, and for universities, it’s simply a matter of how quickly they embrace it.

“Historically, it has been regulatory uncertainty that has made universities wary about accepting and investing in cryptocurrencies,” Duffy said. Today in the United States, he continued, “The regulatory clarity and political support we see on both sides of the aisle has made these concerns clear.”

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And with countries like South Korea poised to offer the regulatory green light as well, it may not be long before institutions around the world follow in the footsteps of their American counterparts.

helen.packer@timeshighereducation.com