Cryptocurrencies have changed the financial landscape.

Why cryp­to­cur­ren­cies are exci­ting news for charities

It’s time to rethink money: new currencies are being created in the digital world. Technologies, not central banks, are now in charge of making sure that currencies remain secure.

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

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