Charities using cryptocurrencies to fundraise should expect those assets to lose value, the regulator has warned.
Trustees should be wary of relying on cryptocurrency markets which are “largely unregulated” and where the value of assets is highly volatile, according to new guidance from the Charity Commission.
Cryptocurrencies are digital currencies underpinned by blockchain, a technology that creates a public, immutable ledger of financial transactions.
It is unclear how many charities accept or hold cryptocurrencies and other crypto assets, although the RNLI and Edinburgh Cats and Dogs Home have both done so in the past. The Wikimedia Foundation announced last year that it would no longer accept crypto donations.
The commission’s updated guidance on how to manage a charity’s internal finances – known as CC8 – also advises trustees on managing donations made using digital platforms like Apple Pay and PayPal.
The guide reminds trustees: “You have a legal duty to manage your charity’s resources responsibly, including by implementing appropriate financial controls and managing risk.”
It adds that “there are many risks associated with crypto assets”, including the volatility of their value, the potential of fraud by cyber criminals and the fact that losses are unlikely to be covered by mainstream compensation and insurance schemes.
The guidance says: “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 for anti-money laundering and counterterrorism as required.”
The guide has also been updated to include guidance on managing mobile payment systems like Google Pay, Apple Pay and PayPal.
It says: “You should have the same controls in place as for payment by debit, credit or charge cards.”