Charities weigh up gains in accepting bitcoin donations

The technology underpinning the bitcoin digital currency could revolutionize the way in which charities operate by cutting transaction costs and ensuring more money goes to worthwhile causes, according to the Charities Aid Foundation.

Greater transparency provided by the “blockchain” technology — effectively a public ledger managed by a third party — would allow donors to track more effectively how their money was being spent, a CAF report found.

“Charities always face issues in terms of managing trust,” said Rhodri Davies, head of the Giving Thought policy programme at CAF. “With blockchain, you will be able to see where the money goes and track your donation as it goes through the charity.”

The financial services sector has been closely scrutinising developments in blockchain technology to see how cuts in transaction costs, as there is no intermediary to pay, can be applied to their businesses.

Barclays, for example, has been working with Safello, a bitcoin exchange, as part of the bank’s small business accelerator programme. Barclays said that while the project was still at the exploratory stage, one of the possible spin-offs was to examine how charities could start accepting bitcoin payments.

Peter Randall, chief operating officer of UK blockchain start-up SETL, said the charity sector could be one of the biggest beneficiaries of the financial services sector’s investigation into the new technology.

“A blockchain can be used to . . . reduce the costs of collection . . . very significantly. It is equally at home processing small amounts as well as larger donations.”

“Nano-donations” — much smaller amounts of money — could become the way in which people donate in the future, said Peter Smith, chief executive of Blockchain, a provider of bitcoin software.

“At the moment, you can’t really donate tiny amounts of money — and can’t send small amounts of money as well,” he said. “With bitcoin and blockchain, you could now [donate money to] pay schoolchildren a dollar for every assignment that they complete or a cent for every page they read in a book: you can incentivise reading. There are lots of really cool models.”

The Royal National Lifeboat Institution was one of the first charities in the UK to accept donations via bitcoin. So far the charity has raised just over £2,500 from 600 different donations — many at a much smaller level than usual. “We look at [bitcoin] as an online cash box,” said Luke Williams, project leader for bitcoin at the RNLI.

Mr Williams said he was aware of the benefits offered by blockchain technology but it was not something the charity was considering at present. “There is great value in bitcoin and blockchain in terms of international aid and moving money internationally,” he said.

“One bitcoin wallet is the same regardless of where you are in the world. You don’t have the same fees to transfer the money.”

Sam Deere, of Giving What We Can, part of the Centre for Effective Altruism, said the transparency offered by a blockchain-based transaction system would lead to a greater number of people being able to trust charities with their money. “Donors can be confident that what they donate actually goes to the charity,” he said.

Via: http://www.ft.com/cms/s/0/cf6644e8-a33f-11e5-bc70-7ff6d4fd203a.html#axzz3uVZ8U6Qp

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