Why cryp­to­cur­ren­cies are exci­ting news for charities

Back in 2017, the economy was booming. Bitcoin prices shot to their highest level, and so did the public’s aware­ness of this currency: it was like the gold rush for cryp­to­cur­ren­cies,’ says Marius Messerli, a cryp­to­cur­rency inves­tor. A soft­ware deve­lo­per, Messerli sold his company and has been focu­sing on Bitcoin and other cryp­to­cur­ren­cies since 2013. ‘Cryp­to­cur­rency prices have correc­ted them­sel­ves over the past year,’ says Messerli. As part of this, Bitcoin (BTC) has once again risen to amount to 70 percent of the market capi­ta­li­sa­tion of all 1,000 or so cryp­to­cur­ren­cies. Messerli explains that things have quie­tened down a bit in 2019. He belie­ves that there is a conso­li­da­tion phase under­way: ‘Lots of inves­tors are waiting to see what Bitcoin and its chal­len­gers are going to do over the next few months, and how insti­tu­tio­nal inves­tors are going to act.’ 

Tax expert Thomas Linder, from the law, tax and compli­ance firm MME, also talks of a phase of conso­li­da­tion. He is an expert in crypto charity funds, and has been working with block­chain projects since 2013. He assis­ted with setting up the charity Ethe­reum, which is now the second largest cryp­to­cur­rency. Ethe­reum is now just one of many crypto charity funds estab­lished in Switz­er­land. Linder gives two reasons why people in Switz­er­land are opting for the struc­ture of a charity: ‘The concept of the block­chain is a good fit for a poli­ti­cal system shaped by decen­tra­li­sa­tion, co-deter­mi­na­tion and direct demo­cracy. And a charity is conside­red to be an ideal legal struc­ture because it is only obli­ged to pursue its chari­ta­ble purpo­ses, meaning that it is protec­ted against vested inte­rests. It is hard to change a charity’s purpo­ses, and project spon­sors can trust that their funds are being used to these ends.’ 

Trans­pa­rency from one person to the next

‘The currency ques­tion wasn’t our top prio­rity when we set up Ethe­reum. It was about deve­lo­ping a decen­tra­li­sed tech­no­logy that was inde­pen­dent of banks or other inter­me­dia­ries, on a global scale,’ says Thomas Linder. In simple terms, the block­chain meets two key requi­re­ments. First off, unlike with tradi­tio­nal curren­cies digi­tally posted by banks, cryp­to­cur­ren­cies are trans­fer­red directly from one person to the next. To do this, you need an elec­tro­nic wallet. The money flows straight from this wallet to the recipient’s wallet, without passing through a bank. The trans­fer is not guaran­teed by an insti­tu­tion, but by the block­chain, which stores all the tran­sac­tions that take place. And secondly, the data is publicly acces­si­ble and trans­pa­rent. ‘Just this week, I saw that a tran­sac­tion of 300 million dollars had taken place,’ says Marius Messerli. The block­chain stores all the tran­sac­tions. For Bitcoin, the addres­ses of the sender and reci­pi­ents, plus the amount trans­fer­red, can be seen by anyone at any time. Howe­ver, the gene­ral public usually only know the people behind these addres­ses if the people in ques­tion make this infor­ma­tion available. As a result, Bitcoin is called ‘pseud­ony­mous’, rather than ‘anony­mous’. 

Public impact

Even though Bitcoin, Ethe­reum and all the rest are based on tech­no­logy, Marius Messerli thinks that the key lies in the currency aspect itself: ‘Without that, nobody would be talking about them.’ That’s why he takes a posi­tive stance on Libra, a currency being plan­ned by Face­book, as Facebook’s acti­vi­ties are guaran­teed to attract the atten­tion of the public. As he explains, ‘Libra will force poli­ti­ci­ans to get to grips with this topic.’ Marius Messerli thinks it is only logi­cal that the USA, in parti­cu­lar, is begin­ning to get inte­res­ted in this issue. ‘If someone set up a cryp­to­cur­rency that was inde­pen­dent of the dollar, the USA would lose its posi­tion of being the leading mone­tary power.’ 

Effec­tive impact monitoring

Trans­pa­rency and tracea­bi­lity mean that cryp­to­cur­ren­cies are also exci­ting news for chari­ties. ‘For exam­ple, if I want to support a project in a deve­lo­ping coun­try, using a cryp­to­cur­rency enables me to check whether the money has actually made it to the project in ques­tion, and where it’s gone from there,’ says Thomas Linder. This equa­tes to effec­tive impact moni­to­ring. Inde­pen­dence from state insti­tu­ti­ons is an advan­tage that ensu­res secure funding in count­ries with unsta­ble poli­ti­cal systems or inse­cure curren­cies. Marius Messerli also gives another exam­ple of a major area of poten­tial: ‘If I put out a call for dona­ti­ons in a cryp­to­cur­rency, people can donate in the same way, no matter where in the world they’re based.’

Bitcoin
Bitcoin, set up in 2009, was the first cryp­to­cur­rency. Sato­shi Naka­moto was behind it, but we still do not know whether Naka­moto was the pseud­onym for a person or a group. In 2008, Naka­moto published a white paper describ­ing the basics of this cryp­to­cur­rency.
www.bitcoin.org
www.ethereum.org