Posts tagged with: fungibility

tkc1Christians colleges aren’t usually known for being on the cutting-edge of technology. But The King’s College, an evangelical college located in New York City, is leading the way by becoming the first accredited college in the United States to accept Bitcoin for tuition and other expenses:

“The King’s College seeks to transform society by preparing students for careers in which they help to shape and eventually to lead strategic public and private institutions. Allowing Bitcoin to be used to pay for a King’s education decreases our costs while simultaneously allowing our students to be a part of this exciting new technology,” said Dr. Gregory Alan Thornbury, President of The King’s College.

Coin.co CEO Brendan Diaz added, “Over the past year, the Coin.co team has led the effort to enable U.S. colleges, universities and other major institutions to accept Bitcoin without incurring any currency risk. Coin.co is proud to be working with The King’s College, and to be a part of pioneering the use of Bitcoin for education.”

Before commenting on their adoption of cryptocurrency for tuition, let me express my admiration for TKC. I’m a fan of the school’s president, Dr. Gregory Alan Thornbury, and our friend and Acton contributor Dr. Anthony Bradley, who is a professor of theology and ethics at the school. I applaud the college for being savvy enough to accept Bitcoins—and would advise students to be savvy enough not to pay their tuition with them.

The reason, as I’ve pointed out before, is that Bitcoins are no longer completely fungible.

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Blog author: jcarter
posted by on Thursday, March 27, 2014

bitcoin“For federal tax purposes, virtual currency is treated as property.”

With those ten words, the IRS has made it more difficult — if not impossible — for bitcoin and other virtual currencies from gaining widespread, mainstream acceptance as a currency for commercial transactions. Because they are now treated as property, virtual currencies are considered, like stocks, bonds, and other investment property, as capital assets and will be subject to capital gains tax.

But why does this hinder bitcoins use a currency? The answer is fungibility: Bitcoins are no longer completely fungible.
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A fight broke out this week between non-profit groups over fundraising. While not in direct competition for donor dollars, the U.S. Sportsmen’s Alliance expressed its displeasure with Meijer, Inc. for participating in a fundraising event with the Humane Society of the United States. The program was set up to contribute money to a support Foreclosure Pets Fund, designed to give support to pet owners facing foreclosure.

Meijer suspended the program after fielding complaints from the Alliance that the chain was cooperating with an anti-hunting organization. What does pet foreclosure have to do with anti-hunting? An Alliance statement gets at the crux of the issue, pointing out, “The money donated to the HSUS through this promotion, while not going directly to its anti-hunting campaign, will free up money from the organization’s general fund that can be used to attack the right of sportsmen.”

We put the “fun” in “fungibility.”

That, my friends, is called fungibility, a fancy word that simply is used to identify the ability for money or funds to be transferred between sectors of a balance sheet and across budgets. I don’t want to adjudicate the dispute and attempt to determine whether or not the Humane Society really is anti-hunting, but the cogency of the Alliance’s argument hinges on a valuable lesson, what I’m calling here the “fungibility phenomenon.”

When you give to an organization and you earmark the funds to be used in a particular way, you may be inclined to think that your money is somehow isolated from the rest of the non-profit’s budget. Depending on the by-laws of the organization, that may or may not be the case. Unless there is a minmum set amount that the organization determines it will spend on an area irrespective of special and specific additional donation, any funds that are contributed to that particular area lessen the demand for money to come from other parts of the budget.

The fungibility phenomenon isn’t restricted to non-profits, of course. Corrupt governments have been taking advantage of this phenomenon domestically through state lotteries and internationally through government-to-government foreign aid for decades.

But for the discerning giver, it’s important to note that the fungibility phenomon means that when you give, whether or not you specify a particular need or area for the funds to be used, generally you are supporting the mission of the recipient organization in all its facets, some which you may not like.

And if you’re looking for a charity whose mission you can unreservedly support, the Samaritan Guide is a great place to start.