In 2023, Korean video game company WeMade pledged to donate the equivalent of one billion Korean won in Wemix tokens – a cryptocurrency linked to the blockchain platform of the same name – to Seoul National University.
What seemed like a moment for celebration quickly turned into controversy as the university eventually stopped accepting cryptocurrency donations altogether.
So what happened? WeMade reportedly liquidated a large portion of its coins shortly after the donation, causing significant currency devaluation and causing SNU’s donation to no longer be worth as much – a problem since the funds were earmarked for a specific project .
That wasn’t the only obstacle. According to South Korea’s financial regulations, the university was also unable to open a corporate account for virtual asset exchanges. As calls for a change in the law went unanswered, the university was stuck with a volatile currency that it could not convert into cash.
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Now it’s the Korean regulators allegedly Consideration is being given to allowing the country’s universities to convert cryptocurrencies for the first time – potentially opening up a significant new source of funding for the country’s financially struggling sector.
Elsewhere, universities are already benefiting from the crypto craze, especially in the USA. In 2021, the University of Pennsylvania received $5 million (£4 million) in Bitcoin from an unnamed donor. A year later, Vitalik Buterin, co-founder of Ethereum, a leading blockchain, donated USDC coins equivalent to $9.4 million to the University of Maryland to fund post-pandemic public health research.
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The Giving Block, a US-based platform that facilitates cryptocurrency donations to nonprofit organizations, said the higher education sector has been one of its “biggest growth areas” over the past two years, with Washington State University and Northeastern University among the company’s clients.
“There are several factors driving this, such as the booming crypto market and wider mainstream adoption, but the biggest driver for schools is simply following the money,” said Pat Duffy, its co-founder.
As analysts expect popular currencies like Bitcoin to continue to rise in value this year, spurred by the crypto-friendly rhetoric of the newly inaugurated Donald Trump, universities could benefit – if they are prepared to manage the risks that come with the volatile landscape accompany.
“For donors in the U.S., the tax incentive is the biggest driver,” Duffy said. “You can skip capital gains tax on appreciated assets and still get a deduction for the full market value.
“The donor pays no taxes on their treasured cryptocurrency, and neither does the school.” Donors across the country are eliminating tens of millions of dollars in tax liabilities by choosing to give using cryptocurrencies and thereby making larger donations…”
For universities, embracing cryptocurrencies can also provide an opportunity to target their fundraising toward a younger, tech-savvy market. “They can attract more people if they accept crypto payments,” said Nir Kshetri, a professor of management at the University of North Carolina.
Universities don’t just benefit from donations. Some, like Bentley University, have begun accepting cryptocurrency tuition, which has a significant impact on international students.
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In Nigeria, for example, converting naira to US dollars to pay fees can be a complicated process. According to Kshetri, paying with decentralized cryptocurrency is easier and faster for some.
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However, a key risk for universities is the unpredictability of cryptocurrency markets, with fears compounded by Bitcoin’s volatility in recent years. While the market is recovering, crashes like those in 2022 have left a lasting impact and made some universities wary.
“It’s at its peak right now, but who’s to say we won’t see a return to what we saw two years ago when the bottom fell?” warned Bill Stanczykiewicz, director of the Fund Raising School at Indiana University Indianapolis.
According to Stanczykiewicz, the best course of action is to avoid holding on to cryptocurrencies even when an increase in value is predicted. “What we tell fundraisers is, when you receive crypto, convert it to your local currency as quickly as possible,” he said, or use a platform like Giving Block that does this for you.
However, this approach is not universal. In Paraguay, Universidad Americana is less risk-averse than others and assesses the market before converting cryptocurrency payments.
Universities considering this route also need to consider the ethical issues, Stanczykiewicz said, and whether such donations would be consistent with their institution’s values.
In particular, the environmental impact of currencies like Bitcoin is a cause for concern for some. However, Kshetri argued that the coin had already been mined before the donation – meaning the damage had already been done. “Just transferring these bitcoins from you to me uses very little… electricity,” he said.
Whatever your ethical view, those interviewed for this article agreed: Cryptocurrency is here to stay, and for universities it’s simply a question of how quickly they embrace it.
“In the past, it was regulatory uncertainty that made universities nervous about accepting and investing in cryptocurrencies,” Duffy said. Today he continued: “In the US, regulatory clarity and the political support we see on both sides of the aisle have addressed these concerns.”
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With countries like South Korea also set to give the green light to regulation, it may not be long before institutions around the world follow in the footsteps of their US counterparts.
helen.packer@timeshighereducation.com
