FI410 Unit 8 Digital Asset Risk Memo Example

Take the Gift, Not the Keys: A Unit 8 Digital Asset Risk Memo on a $600,000 Bitcoin Donation

[Student Name]

Purdue University Global

FI410: Blockchain for the Financial Industry

Unit 8 Digital Asset Risk Memo

[Instructor Name]

[Date]

The foundation, the donor, the board member and every figure except bitcoin's 2022 price decline are composite; the standard, notice and article cited are real. Not tax or legal advice.

Memorandum

To: Finance Committee From: Controller Date: February 9, 2026 Re: Proposed $600,000 bitcoin gift and whether to hold digital assets

Recommendation

Accept the gift through a donation processor that converts the bitcoin to dollars on receipt. Adopt a written policy that the foundation does not hold digital assets. Decline the proposal to keep the coins as a reserve.

What the Gift Brings

The gift is worth about $600,000, close to a fifth of our annual grant budget. Accepting it also signals to other donors who hold appreciated digital assets that we can receive such gifts, which may open a new source of support. Donors often prefer giving appreciated assets directly because the tax treatment can be favorable to them; the IRS treats virtual currency as property, not currency, for federal tax purposes (Internal Revenue Service, 2014).

Risk Register

Custody. If we held the bitcoin, we would need to hold the private keys that control it. Keeping keys ourselves, on a hardware device or in a paper backup, means a lost device, a forgotten password or a treasurer who leaves without handing over access can make the coins permanently unrecoverable. No bank or court can restore them. Holding them on an exchange instead exposes us to the exchange's own failure: in 2022, several large crypto platforms collapsed or froze withdrawals, and customers waited years for partial recoveries or received nothing.

Volatility. Bitcoin's dollar value fell by close to two-thirds during 2022 alone. Research on crypto returns finds that their swings are large and driven mostly by factors specific to crypto markets, such as momentum and investor attention, rather than by the economic forces that move stocks and bonds (Liu & Tsyvinski, 2021). A $600,000 reserve could become $200,000 within a year with no change in our programs' needs.

Accounting. Under newer standards, we would remeasure any crypto we held to its market price at every reporting date and show the gain or loss in our statement of activities (Financial Accounting Standards Board, 2023). That improves on the old impairment-only treatment but means our reported results would swing with bitcoin's price, which could confuse grantmakers and complicate our budget.

The gift's value to the foundation is its dollars, and every risk on this register comes from holding the bitcoin rather than receiving it, so converting on receipt keeps nearly all of the benefit while removing nearly all of the risk.

Why Not Hold It as a Reserve

The board member argues that bitcoin has risen over the long run and that holding it would grow our reserve. Our reserve exists to pay grants and salaries if income falls. An asset that can lose two-thirds of its value in a year, at times when other markets are also under stress, does not serve that purpose. Our investment policy already limits volatile holdings, and bitcoin would fall outside it. If the board wishes to reconsider that policy, it should do so as a separate question, not through this gift.

How the Processor Works

The processor gives the donor a wallet address for the gift. When the bitcoin arrives, the processor sells it within minutes and wires dollars to our account, less a fee of about 1 percent. The foundation never holds keys. The processor provides a receipt showing the date and amount received, which we need for our acknowledgment to the donor.

Tax Paperwork

For a gift of property over $5,000, the donor must obtain a qualified appraisal to claim a deduction, and we must sign the donee portion of the donor's appraisal summary form. Because we will sell the bitcoin within three years, we must also file the IRS form reporting the sale. Our acknowledgment letter should describe the property received and must not state its value, which is the donor's responsibility to establish.

Talking With the Donor

The donor should hear our plan before the gift arrives. Some crypto donors want their gift held as crypto; most care that it funds the work. A short call from the executive director, explaining that the gift will fund the mobile clinic expansion in dollars and that we convert all digital gifts on receipt as a matter of policy, avoids any surprise and lets the donor choose another recipient if holding matters to them.

Next Steps

Approve the processor agreement, adopt the digital asset policy at the March meeting and send the donor written instructions this week.

References

Financial Accounting Standards Board. (2023). Accounting Standards Update No. 2023-08, Intangibles-Goodwill and other-Crypto assets (Subtopic 350-60): Accounting for and disclosure of crypto assets. FASB.

Internal Revenue Service. (2014). Notice 2014-21. Internal Revenue Bulletin, 2014-16, 938.

Liu, Y., & Tsyvinski, A. (2021). Risks and returns of cryptocurrency. The Review of Financial Studies, 34(6), 2689-2727. https://doi.org/10.1093/rfs/hhaa113