The University of Puget Sound in February became the first higher ed institution to accept a gift of digital currency, when alumnus Nicolas Cary gave the Washington school 14.5 bitcoins—equal to $10,000.
For the uninitiated, Bitcoin is a global, open source virtual economy created in 2009, and bitcoins are its cyber currency, used for electronic purchases and transfers. There’s no central bank controling bitcoins. Value is set by the Bitcoin community based on supply and demand on open currency exchanges. (Note: As a reader comments below, in late March the IRS ruled that bitcoins and other virtual currencies will be treated as property rather than currency. "General tax principles that apply to property transactions apply to transactions using virtual currency," the IRS said.)
Accepting this unusual donation required research and planning, says Sherry Mondou, vice president for finance and administration at Puget Sound. “Our gift acceptance policy, not surprisingly, was silent on gifts of digital currency. We needed to learn more about Bitcoin and we did our due diligence.”
The gift was approved on the condition that the bitcoins could immediately be converted to U.S. dollars, eliminating exchange rate risks.
After establishing an account with the payment processing company BitPay, Mondou created a pledge statement in U.S. dollars.
“BitPay transferred the U.S. dollars to the university’s bank account the following day,” Mondou says. Processing fees were waived because the university is a nonprofit.
Bitcoin has sparked interest at several universities, including the University of Michigan, Penn State, Harvard and Stanford, among others, where clubs have formed to explore the possibilities of a currency that doesn’t play by conventional rules.
“We believe Bitcoin has the potential to be not just a digital currency, but the future of money,” says Dan Elitzer, president of MIT’s Bitcoin club. “While it is still in the early stages, we see Bitcoin as a protocol or platform on which financial and nonfinancial transactions can be conducted and verified as part of a global public ledger.”
Bitcoin’s Big Year
- Price for one bitcoin on 3/17/2013: $47.50
- Price* on 3/13/2014: $638.17
Bitcoin lies at the intersection of several academic research areas, including cryptography, distributed computing, graph theory, finance and economics, Elitzer says.
Although it isn’t used on campus yet, he says two local restaurants accept bitcoins as a form of payment. There is also a Bitcoin ATM in Boston’s South Station.
Puget Sound, meanwhile, has since received three more bitcoin donations, Mondou says. “The donors say they wanted to give to the school anyway and were inspired by Cary’s gift to make it in this new currency.” But, she adds, “Digital currency is in its infancy and will require ongoing evaluation.” —Tim Goral