Fidelity Charitable Launches NFT Lottery Amid Crypto Downtime
NEW YORK (AP) — Fidelity Charitable is getting into NFTs, the digital images recorded on the blockchain, despite a flood of bad news from the adjacent world of cryptocurrencies.
The nation’s largest grantmaker is sponsoring a raffle that ends Tuesday, where participants can claim one of the NFTs, which stands for nonfungible token, and 50 will win $1,000 to donate through a donor-advised fund at Fidelity.
“The reason we’re doing this is because we really believe there’s a whole new generation of donors and philanthropists out there,” said Amy Pirozzolo, head of donor engagement for Fidelity Charitable. “We want to be where they are and the channels they use and the formats they use, and further encourage their generosity.”
About 16% of Americans say they invested in cryptocurrencies, according to a Pew Research Center poll last year. The demographic most likely to invest was men between the ages of 18 and 29, with 43% reporting that they had invested.
The blockchain is the technology behind the trading of cryptocurrencies, but it can also record the ownership of digital objects such as photos, videos or tweets. Fidelity said 50,000 different wallets, potentially representing that many individuals, have already signed up to create an NFT and potentially win the money to donate.
Cryptocurrency contributions to donor-advised funds at Fidelity exploded last year, growing from the equivalent of $28 million in 2020 to $331 million in 2021, Fidelity has said.
Speaking about the NFT project, Jacob Pruitt, president of Fidelity Charitable, said, “I think it will be a unique way to engage with the next generation of investors. It’s another way that I think Fidelity is innovating and leaning into a new room.”
Donor advised funds allow donors to claim a tax deduction for charitable donations, but do not require them to give away those funds within any specific time frame. Organizations that host DAFs, such as Fidelity Charitable, also handle more complex donations, which include exchanging the assets for cash and producing receipts for donors for tax purposes.
“A lot of the nonprofits either can’t take on those assets or they have to hire outside counsel or staff to do it,” Pirozzolo said.
One reason for the jump in cryptocurrency donations is that until recently their value had increased significantly. The cryptocurrency market saw a huge boom in 2021, with the price of Bitcoin, the first cryptocurrency, rising to an all-time high of around $68,000 last November.
But the meltdown of Terra – a stablecoin, or a type of cryptocurrency that tries to peg its value to an asset like the US dollar – in May brought down a number of major cryptocurrency companies. Then, earlier this month, one of the largest cryptocurrency exchanges, FTX and related entities, suddenly filed for bankruptcy, leaving both US and international users unable to access assets they held on the exchange.
James Lawrence, co-founder and CEO of Engiven, which facilitates cryptocurrency for non-profits, including Christian ministries, observed that many cryptocurrency givers make large gifts, and that they often happen in the last quarter of the year. That means it’s too early to say how the fluctuations in the cryptocurrency market might affect donations this year. He said he doesn’t see people donating cryptocurrencies as being any different than other donors.
“They just have another asset to give, and they’re going to give the most valued asset they can,” Lawrence said.
Of the more than 1.5 million nonprofits registered with the Internal Revenue Service in the United States, Lawrence estimated that only four or five thousand could receive cryptocurrency donations directly.
“There’s a huge market that still doesn’t,” he said. He has also observed that many who make large donations in cryptocurrency (they facilitated one donation of $10 million in cryptocurrency assets) are the same type of people who make large donations in general, and not necessarily the younger demographic who are more likely to invest in cryptocurrency. .
“Many of the largest gifts we’ve processed have been from an older demographic that has a tradition of making large gifts across multiple asset classes,” he said.
Pirozzolo argued that the Fidelity Charitable campaign using NFTs is separate from the cryptocurrency ecosystem.
“This is really about the blockchain and having a fun way to celebrate the generosity of giving digital art,” she said.
The company pays for the cost of creating the NFTs, which includes a “gas” fee that pays for the creation and registration of the item, and also said it has compensated the artists who created the images.
People claiming the NFTs must register for a cryptocurrency wallet that has access to the Polygon blockchain. Fidelity Charitable NFTs will be hosted on the OpenSea platform.
Participants will see the NFT in their wallet when they register, but the actual art and winners of the $1,000 tickets will not be revealed until Giving Tuesday, November 29th.
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