BOSTON — Cape Cod Healthcare will take your donation in U.S. dollars — and now, in cryptocurrency.
Twice this year, an anonymous donor has given the company $400,000 worth of bitcoin, a virtual form of payment managed by a computer network called a blockchain. The donation had little precedent in the world of health care, said Chris Lawson, Cape Cod Healthcare’s senior vice president and chief development officer. As cryptocurrency use becomes more popular, he said, the organization soon could be a first of many.
“I think what’s going to occur — without having a crystal ball — is that more and more charities are going to recognize that this is a real opportunity in terms of building philanthropic support,” he said.
A new type of donation
Lawson said Cape Cod Healthcare had no way of accepting cryptocurrency donations when the donor, who was a regular contributor, first asked about the possibility of sending bitcoin.
The organization needed clearance from president and CEO Michael K. Lauf, as well as its finance and legal departments, to pursue the gift, Lawson said. They relied on guidelines from the Internal Revenue Service about virtual currency transactions, he said, which include specifics for charitable gifts.
To accept the bitcoins, Cape Cod Healthcare had to open an account with a cryptocurrency broker, Lawson said. The broker gave them a unique QR code to send to the donor, who then used the code to transfer cryptocurrency into the health provider’s digital wallet.
Cape Cod Healthcare immediately converted the bitcoins into U.S. dollars that were deposited into a traditional bank account, Lawson said. Holding on to bitcoins for an extended period of time can be risky, he said, because their price fluctuates, which could change the value of a donation.
The donor’s first $400,000 contribution was about 10 coins, Lawson said, but their second contribution — for the same amount — was about eight coins just a couple of weeks later. He said this jump in value came after the car manufacturer Tesla announced it had bought $1.5 billion worth of the currency.
One bitcoin currently is worth about $60,000, according to the website CoinDesk.
This volatility in price sets cryptocurrency apart from the gifts Cape Cod Healthcare typically receives, such as stock, Lawson said. Otherwise, the process of cashing the gift is fairly similar.
“If somebody donates IBM stock, there’s a relatively good chance it’s not going to change so much in value by the time that you liquidate it,” he said. “Whereas cryptocurrency, there could be a swing in a day or two from $60,000 a coin for Bitcoin down to $45,000.”
Emerging technology
In essence, a group of people called miners lend their computing power to verify other users’ transactions so that the same bitcoin isn’t spent twice. They are given new bitcoins as rewards.
Transactions typically are completed anonymously, making the currency popular among people who want to conceal their financial activity. However, investigators may still be able to tie transactions to a real person when bitcoins are converted into a traditional currency for spending elsewhere, according to the Associated Press.
The system was designed with a finite supply of bitcoins, with about 17 million minted so far and another 4 million to come. The rate of minting slows down over time, such that the final bitcoin isn’t expected for another century.
On Beacon Hill, a recent bill co-sponsored by Sen. Susan Moran, D-Falmouth, would create a commission to study the expanded use of cryptocurrency in the private sector, as well as state and local government.
The group would consider the feasibility of taxing cryptocurrency transactions, ways government agencies might accept cryptocurrency, steps to ensure equitable access to the technology, and possible regulations on the energy consumption associated with creating virtual coins, among other uses.
Cryptocurrency such as that in the Bitcoin system is created, or “mined,” when users attempt to solve complex math problems and verify other transactions on the bitcoin network. These processes require powerful computers, so they consume a relatively large amount of energy.
Other types of cryptocurrency include Ethereum, Litecoin, Cardano and Dogecoin, which was inspired by the popular internet meme of a Shiba Inu dog. As with other cryptocurrencies, bitcoins do not exist as physical bills or coins. Rather, they exist as lines of computer code that are digitally signed each time they travel from one owner to the next, the Associated Press reports.
The Massachusetts commission also would study how governments and businesses can use blockchain technology in their existing workflows. Ian Cain, co-founder of the Quincy-based startup incubator QUBIC Labs, said a blockchain can be described as “a decentralized ledger of transactions across a peer-to-peer network.”
Governments can use blockchain like they would an existing database to store information such as voter records, property titles or building permits, said Cain, who also sits on the Quincy City Council. The difference is that while a traditional database exists on a single server, a blockchain database is copied into every computer on a given network.
This can keep the information more secure, Cain said, since multiple computers verify and track the changes that are made. Since most cryptocurrencies use a blockchain, governments also could use the technology to accept payments from their citizens, or even issue bonds, he said.
Moran said given that blockchain can be used to store personal information, the state should take a close look at its security. She said she hopes the commission would publish a report of its findings to help people better understand not just how the technology works, but also any potential risks.
“I think it’s quite evident that a lot of our financial means are ready to be modernized,” Moran said, noting that because cryptocurrency can be a volatile investment, some users might need a form of protection so they “don’t get taken advantage of.”
Local adoption
With the exception of Cape Cod Healthcare, cryptocurrency use among local businesses has been limited so far, according to Bert Jackson, CEO of the Cape Cod Technology Council.
Cain said Texas and Wyoming are two states recognized as leaders in blockchain adoption, though the commonwealth has the potential to be a hub for the technology going forward. MassMutual, one of the state’s largest employers, announced in December it had purchased $100 million in bitcoin.
“I think it’s a great first step,” Cain said of the bill seeking a commission to study cryptocurrency and blockchain. “I would like to consider us at the forefront for sure.”