Gifting a Loved One Crypto this Year? What You Should Know
Allow me to set the stage with a terrifying scene: It’s a Tuesday. You get a call from your mother at lunchtime reminding you that your father’s birthday is today. Your face pales, you start to sweat. You completely forgot, and you didn’t get him anything. He lives in another city, whatever you can scramble to come up with will have to be electronic. Whether we want to admit it or not, and regardless of how much I just dramatized this, we’ve all been there before, in some fashion. The old tricks just aren’t what they used to be for this anymore, either. Sending a Venmo for a drink while out celebrating wasn’t an option during the pandemic, and eGift cards for Amazon, Target, or other stores feel just as impersonal as cash. In our COVID-recovery world, we’re all seeking better ways to come together, and have personal connections when not actually around one another. What better way to bring a loved one closer, while still not physically together, than to share a new investment journey with them?
Come On In, the (Crypto) Water’s Fine!
Giving the gift of crypto provides a unique avenue to share a new connection with someone you love, kicking off a new journey for them and opening up an additional common interest for you both to share. Many wallets and platforms have their own subsections just for gifting, and even have options to send a themed ecard and a personalized message along with the currency. Plenty of these platforms also have educational initiatives and “learn to earn” programs, encouraging new users to learn more about different coins and blockchains with a reward of earning small amounts of crypto as an incentive for completing a module or lesson. Giving crypto as a present is not an alien concept for gifting, either- during this past holiday season, BlockFi published a survey that confirmed one in 10 people planned on giving the gift of crypto to someone for the holidays.
With DeFi Power Comes DeFi Responsibility
Considering those numbers, you’d be among good company in making the decision to gift crypto to a loved one, but you do need to keep in mind that you’re not just making an investment decision for yourself, but for someone else. Gifting crypto is like giving someone a large cactus as a present- while it doesn’t need much attention, if you have zero interest in it whatsoever, it will end up abandoned, of no use to the recipient, and an effort made in vain on your part. First thing’s first- make sure your blockchain beneficiary is actually interested in starting a new investment journey.
From there, you’ll need to ensure that they have a wallet you can send the crypto to, or you’ll need to put the funds on a gift card that can be exchanged for crypto until that person’s wallet is set up. Helping a loved one set up their wallet adds the human element to a digital gift and keeps us in that personal connection we’re all seeking to reestablish and maintain, but also gives the gift giver some responsibility and ownership of the task.
You’ll also be in charge of ensuring that your giftee understands how crypto purchasing, trading, and selling works, and the volatility that comes along with dabbling in digital assets. Nothing in life is guaranteed, and that also includes the value of cryptocurrency. While they don’t need to be following the whiplash pricing with every peak and valley, a courteous heads up on the cryptocoaster they’re getting would be appreciated.
Uncle Sam Gets His Cut- and So Does Cousin Crypto
While gifting crypto is, in theory, giving someone free money, there are some asterisks that go along with accepting digital assets. Namely, the most American of all traditions- paying taxes on your assets. As of this new tax year for 2022, the person who gives the crypto does not need to pay taxes on that gift if it is under $16,000 as it qualifies as falling under the gift tax annual exclusion. The crypto recipient does not need to pay taxes on the gift at all if they simply hold the asset and do nothing with it. It won’t be until they decide to sell or trade the asset that they may be responsible for a capital gain or loss tax. This works just like with buying and selling stocks, so it’s not a novel idea for seasoned investors, and the market exploded with products to assist in crypto tax planning this year, so your loved one has plenty of time to prepare for next year. Although, they may get mad at you for bringing them up right after this tax season ended, so tread at your own risk, there.
You also don’t want to leave out the detail that crypto transactions going on or off a platform are associated with transaction fees. How else do you think these companies can afford to pay the likes of Matt Damon and LeBron James to star in their commercials? Different currencies and platforms have different fees, so some research will be necessary for a new user looking to become a seasoned trader.
Crypto’s No Club- It’s a Community
As our world continues to shift to be more digital than ever, it’s important to make sure that our loved ones don’t fall behind or feel left out of the new experiences we are participating in. If you’re passionate about DeFi, don’t be shy about sharing the love and fun with your family and friends. Investing in a different type of asset can be intimidating for a new user, and the goal of the space is to be a community, not an exclusive club. Use the gift of crypto to create that digital yet personal connection our world is running on, and make sure everyone knows they are welcome to join the crypto community.