As new technologies such as cryptocurrencies emerge and the associated pros and cons are becoming increasingly clear, the Charity Commission has called on charities to review their current financial controls to ensure they are sufficiently safeguarding their resources.
While crypto offer more options for donors in terms of how and what they give, it also brings new potential challenges, particularly in relation to due diligence and financial processes. In line with this, the Charity Commission have recently released an updated version of their internal financial controls for charities guidance (CC8), to help charities understand the new financial landscape and how to navigate it. As well as covering the new and developing areas of giving, it’s also important to note that it provides updated advice on more traditional areas too, such as holding public collections and making payments to related parties. So, even if you are not yet dipping your toe in the water with crypto, it’s still worth looking at this new guidance and making sure you are on top of the updates.
We have reviewed the guidance to share the key findings for fundraisers who are wondering what crypto could mean for them and their fundraising efforts. Below is a snippet of relevant section from the guidance.
The associated risks of cryptoassets, which includes non-fungible tokens (NFTs) and cryptocurrencies, are varied. These include but are not limited to the value changing very quickly, potential fraud or theft by hackers, donations of cryptoassets can be made anonymously which makes it challenging to trace donors, and the environmental impact as many use a lot of energy.
If you decide to adopt these as fundraising methods, the Charity Commission advises the following:
Adopt a policy on accepting, refusing and using cryptoassets, including how you make decisions about converting them to traditional currency
If your charity is receiving donations directly in its crypto wallet, ensure the platform you are using is compliant with UK regulations and registered with the Financial Conduct Authority (FCA) for anti-money laundering and counterterrorism as required
Keep accurate records of donations, storage and use
Make sure you follow HMRC’s guidance on the taxation of cryptoassets
Remember that you cannot claim Gift Aid on any cryptoassets
Review the benefits to your charity of accepting cryptocurrency versus the risk
Regularly review your policies on them
This guidance is worth reviewing for your charity as it may hold valuable information to be shared and escalated internally, making sure that your policies and processes are keeping up with developments. And as a mark of good governance, it’s always good to review new guidance and check any areas of compliance that you may need to adapt.
The wider environment for giving and fundraising is always evolving. So as technology like crypto develops, we always need to be reviewing our core guidance too so that it can be most useful to our members. As part of this, we have been working with our members to review and update our current Accepting, Refusing and Returning Donations guidance to see how we can make it most relevant, helpful, and accessible, while bringing in new developments.
This process will lead to us publishing new and updated guidance in the coming months. We will be changing the format a bit, and splitting the guidance into two parts – the first covering accepting and refusing donations, and the second focusing on returning donations (this latter part will come slightly later down the line). To identify areas where the current guidance could be improved, we gathered steering groups formed of fundraisers from across our membership. With their support, the new guidance will include information on cryptocurrencies and more, linking to the relevant and updated Charity Commission guidance.
Be sure to keep an eye out for the release of this new guidance and more over the coming months. And, if you want to find the latest research in the sector, our research roundup is updated regularly, with new findings all in one place.