Are Digital Assets the Next Generation of Charitable Giving?
Done the right way, creative philanthropic strategies benefit both your clients and the charities they support. Charitable giving can have massive tax benefits but, too often, clients have no knowledge that those opportunities exist especially when the philanthropic approach involves giving assets besides cash or stock. Cryptocurrencies - or “digital assets” – as a donation may still seem to be a novelty for many but their acceptance is growing rapidly among high-net-worth clients and charities alike. To give show how some of the brightest, young philanthropists are using digital assets in their planning, I recently spoke with Micah Spruill, Managing Partner, Chief Investment Officer at S2F Capital – a digital asset hedge fund serving high-net-worth individuals and family offices.
What was your journey into digital assets?
Out of undergrad at Roanoke College, I joined Merrill Lynch’s Global Wealth Management Division and worked there for a few years until I decided to hang my own shingle. I moved to Atlanta and started an RIA in 2013. It was around that time I discovered Bitcoin and other cryptocurrencies. I realized that if this thing doesn't die out or get banned, then it is going to be big. And so I took that bet personally and also with client funds. The blended return from those crypto asset investments combined the clients’ traditional stock and bond portfolios were just gangbusters. After that, I spent the better half better part of four years transitioning to full-time focus on crypto investing. That expanded into angel investing efforts in digital asset and blockchain businesses. Some big exits in that portfolio led me to lean into creating a fund – S2F Capital – which I’ve done with a mentor of mine who runs a 100-year-old family office.
How have digital assets become part of your charitable giving strategy?
Back when I was at Roanoke College, I participated in a small student managed investment fund and that’s what helped me get recruited to Merrill Lynch. So, I owe that to them. Fast forward to 2019 after I had I made some wealth for myself. I was on the Roanoke College President's Advisory Board at that time and I kept telling them that our endowment needs digital assets in the portfolio. They weren’t ready for that. So I thought the student managed fund might be a Trojan Horse to introduce crypto investing to the school – allowing the students to manage digital assets as a learning opportunity.
And they I gifted $50,000 in Bitcoin through Coinbase to start it off. The professor who was overseeing the student fund was in his early 30s and a big fan of crypto assets. He was super excited about this opportunity. So that was my first gift. Since then, the students have traded into Ethereum and other digital assets and that $50,000 has grown to $670,000 at last count.
Now I’ve been asked to sit on the college’s Board of Trustees and the cryptocurrency portfolio gets reported along with the school’s larger portfolio performance. I did another Bitcoin gift to the school this year to be liquidated through Bitpay for the purpose of developing a new science center.
Recently, I gave a digital asset gift to the Virginia private school that I attended before college. The school was an incredible environment for learning and I want them to grow. They had never gotten a crypto gift before. There was a whole onboarding process involved in helping them to understand how to accept digital assets. It’s still not easy and there’s a lot of hand holding to do but I really like to be personal in my gifts. I love to meet and work with the people that it's impacting.
It sounds like you're very intentional about this. You're different than most because you know the outcome you're looking for and how to use crypto to facilitate the outside that result.
With the private school, they ask me, “Where do you want the money to go?” I said that I want to start sponsoring underserved students to experience that education which I was privileged to get. Another gift I did was a matching donation using crypto for Feeding America’s efforts in Virginia. On Giving Tuesday back in November where I pledged $25,000 in Bitcoin and then challenged others to match my gift – which got matched.
Crypto and NFT's are our future it appears. I love to see this progress of using cryptocurrency for philanthropy. Most charities can't even take a piece of real estate, so how do we how do we smooth that process? Then again, if they're not prepared, charities are going to miss out on a big wave of opportunity, because there are a number of people like yourself that want to give but what they have is something most charities don't know how to take.
Donating digital assets to Feeding America was a super seamless process because we did it through The Giving Block which is a nonprofit-specific solution for accepting cryptocurrency donations. They charge an onboarding API connection fee of $2500 to the organization, so you need to be of scale or need to have a big gift coming in to offset that. But it was relatively easy and I expect the process to quickly evolve and get simpler. It won’t be long before crypto philanthropy jumps beyond early adopters and change-makers to the mainstream.