UK Charity Commission issues this advisory in light of crypto donations
- The UK Charity Commission issued guidelines for charitable organizations that accept cryptocurrency donations.
- The charities regulator warned organizations about the risks associated with crypto assets.
The Charity Commission for England and Wales recently issued an advisory for English and Welsh charitable organizations. Organizations that accept donations in the form of cryptocurrencies. The guidance comes in light of rising scams and malpractices in the crypto industry.
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The advisory from the Charity Commission had a whole section dedicated to crypto donations. It laid out a long list of the risks associated with such donations. These included the inconsistent value due to the volatile nature of crypto, the likelihood of fraud and theft by hackers, and difficulty in tracing donors of crypto assets.
Furthermore, the environmental impact of cryptocurrencies and blockchain technology was also laid out. The charities regulator also highlighted the fact that crypto assets are largely unregulated. This brings down the protection as compared to traditional currencies or financial products.
The regulator added that if something were to go wrong with crypto, it would be unlikely for the charity to have access to the Financial Services Compensation Scheme (FSCS) or the Financial Conduct Authority (FCA). Furthermore, the advisory pointed out the limited use of crypto donations as they’re accepted as payment by limited retailers.
“Understand the risks of holding, and the limitations of using, crypto assets before you accept donations of them. You should be certain you have the expertise to manage these risks carefully. If you hold any crypto assets you should be prepared for them to lose their value,” the advisory read.
For those that choose to continue accepting crypto donations, the Charity Commission laid out methods to bring down the risk factor. These include using a crypto platform that is compliant with UK regulations and registered with the FCA for anti-money laundering and counterterrorism.
The regulator also recommended charities follow HMRC’s guidance on the taxation of crypto assets.