When attending a birthday party or holiday gift exchange, consider bringing something out of the ordinary to the table: Cryptocurrency. As of 2023, 17% of American adults have dabbled in cryptocurrency, making gifting a portion of Bitcoin or Ethereum a potentially unique present for the right individual, according to the Pew Research Center.
However, it’s important to note that giving cryptocurrency to someone doesn’t alter the underlying volatility of the asset. In many ways, gifting crypto is akin to handing someone a lottery ticket, as the recipient could end up with significantly more – or less – than anticipated.
Here’s a guide on how to gift crypto and what you should keep in mind.
4 Ways to Gift Crypto
Investors are typically advised to exercise extreme caution when dealing with cryptocurrencies due to their lack of backing by tangible assets or cash flow from a company, resulting in prices being solely driven by investor demand.
That being said, if you’re interested in gifting crypto, here are four methods to consider.
1. Crypto Exchange
Crypto exchanges such as Coinbase or Kraken offer a straightforward way to gift cryptocurrency. You can purchase coins directly from an exchange and transfer them to the recipient’s digital wallet if they have one. Some exchanges even provide built-in digital wallets.
It’s important to be aware that exchanges often charge transaction fees, which can impact the overall cost of gifting. For instance, Coinbase applies a spread markup of 0.5% of the trade value along with a flat fee based on the transaction size.
How to use a crypto exchange: Select a cryptocurrency exchange, ensure both you and the recipient have accounts, obtain their wallet address, choose a currency, and send the desired amount.
2. Peer-to-Peer App
Peer-to-peer money transfer apps also offer a convenient option for gifting cryptocurrency. Platforms like Cash App or PayPal allow you to send various cryptocurrencies, with fees varying depending on the app.
How to use a peer-to-peer app: Log into the app, navigate to the appropriate section, select the amount of crypto to send, and specify the recipient.
3. Create a Crypto Wallet
Gifting crypto through a crypto wallet outside of an exchange requires more technical knowledge, as you’ll be granting the recipient the ability to manage the crypto themselves.
How to use a crypto wallet: Choose a wallet, set it up either within software or on a storage device, and grant access to the recipient.
4. Other Ways to Gift Crypto
For those looking to simplify the gifting process, platforms like EarlyBird Crypto or BitCard offer services for gifting Bitcoin and Ethereum. EarlyBird Crypto, for example, facilitates gifting to minors through a custodial account.
How to use a crypto gift card: Decide on the type of crypto gift card, purchase directly from the provider, and gift it to the recipient.
How are Crypto Gifts Taxed?
Similar to other monetary gifts, crypto gifts are not subject to taxes unless they exceed certain thresholds. The annual gift tax exclusion limit in 2024 is $18,000 per recipient, requiring the donor to report the gift on Form 709 if the value exceeds this amount.
Bottom Line
If you’re considering gifting crypto, there are various approaches to explore. For tech-savvy recipients, setting up a crypto wallet or sending funds to their existing wallet may be ideal. Alternatively, purchasing crypto on an exchange or using a peer-to-peer app can simplify the process for both parties.