inding a gift that is unique and memorable can be quite challenging. So, instead of sticking to the traditional gift-giving routine, consider gifting cryptocurrency. Not only is it a unique and exciting present, but it also has the potential to increase in value over time.
But how do you gift cryptocurrency? Its unique digital nature may seem complicated, but fear not! This article will take you through the process of gifting cryptocurrency, from selecting the right cryptocurrency to transferring it to the recipient's wallet. So, let's dive in.
What Is Cryptocurrency?
Before we dive into how to gift cryptocurrency, let's briefly know what it is. Put in layman's terms, cryptocurrency is a digital asset that uses cryptography to secure transactions and control new units' creation. It is not regulated by any government or central bank but is based on a decentralized system called a blockchain and is globally accessible through an internet connection.
Is It a Good Idea to Gift Cryptocurrency?
Well, it depends. So, to help you decide whether gifting cryptocurrency is a good idea, here are some of its pros and cons:
Pros of Gifting Cryptocurrency
- Unique and Innovative Gift
Everyone gets a bouquet of flowers or chocolates as a gift, but gifting cryptos are rare. If you want your gift to stand out, then for sure, you should gift it. It's a non-traditional gift that shows you're thinking outside the box and can be a great conversation starter.
- Potential for Appreciation
Unlike other traditional gifts whose value does not change, cryptocurrency has a potential for appreciation. For instance, if you gifted $100 worth of crypto, it might be worth $200 the next day. Giving cryptocurrency to someone is a great way to help them take steps toward cryptocurrency investments.
- Global Accessibility
As cryptocurrencies operate on a decentralized system, they can be accessible to anyone with an internet connection. Thus, it has wide global accessibility and can be used anywhere. Therefore, it can be a great option if you gift it to someone abroad.
Cons of Gifting Cryptocurrency
- Highly Volatile
Cryptocurrencies are highly volatile. This means it has a high risk of a drastic change in its value. For instance, if you gifted $100 worth of crypto, it might be worth $50 the next day.
- Not for Everybody
Cryptocurrency is a new concept and is not regulated by any authority. Thus, some people might need to learn about it and are uninterested in this topic. On top of that, it is even banned in some countries. So, before gifting the crypto, it's essential to ensure the person is interested in learning about it and that it's legal in their country.
- The Hassle of Teaching About Crypto
If the recipient is not knowledgeable about cryptocurrencies, then chances are that you have to teach them from scratch. Let's be honest; cryptos can be challenging to use and understand, especially for individuals who are not tech-savvy.
Who Can Receive It?
Anyone with a digital wallet can receive cryptocurrency as a gift regardless of age, location, and nationality. However, there are some exceptions.
While there is no age restriction for cryptocurrencies, some sites and exchanges have regulations requiring the person to be over 18 years old. Additionally, some countries, such as China, Nepal, and Qatar, have banned cryptocurrencies, and trading them is illegal there.
Also, not everyone may be interested in or familiar with cryptocurrency investing. So, if you're considering gifting crypto, ensure the recipient is comfortable with this type of investment and understands the risks involved.
How to Gift Cryptocurrency?
Gifting cryptocurrency is not as complicated as it seems. Here are three simple, easy steps to gift them to your loved ones:
Step 1: Choose the Right Cryptocurrency
The first step to gifting cryptocurrency is to choose the right one. You'll want to select an established, reliable crypto with a stable value. It's also essential to pick a widely accepted currency so the recipient can use it easily. Among the popular options, Bitcoin and Ethereum are excellent choices for gifting.
Step 2: Set up a Digital Wallet
Once you've decided which cryptocurrency to gift, it's time to set up a digital wallet for the recipient. If the recipient already has a wallet, then it's much easier. However, if they haven't, you can easily set up the wallet, which can be online, mobile, or hardware-based, depending on their preferences. A wallet is a must as it's where the recipient will store their gifted cryptocurrency.
Step 3: Gift the Cryptocurrency
Finally, you can send the cryptocurrency to the recipient's wallet. There are several ways of transferring cryptocurrency to their wallet, and you can choose any way based on your preferences and convenience. The transfer process is typically quick and seamless, taking only a few minutes to an hour, depending on the cryptocurrency and network congestion. Now, your loved one has received their cryptocurrency gift, and they can use it to buy goods and services or hold onto it as an investment.
Ways to Gift Cryptocurrencies
Depending on how the recipient plans to store and access their digital assets, there are a few ways to gift cryptocurrency. Some of them are as explained below:
One way is to transfer the cryptocurrency to the recipient's wallet using their address. This is similar to a bank transfer and can be done quickly and easily. All you need is the recipient's wallet address, and you can then send the cryptocurrency to their address. Don't worry if the address looks long – you can easily copy and paste it or scan the QR code.
Use a Gift Card or Voucher
Another option is to use a cryptocurrency gift card or voucher. These can be purchased online or in stores and usually come with a unique code that the recipient can redeem for cryptocurrency.
Peer-To-Peer Money Apps
Peer-to-peer money apps like Paypal and Cash App also allow you to gift cryptocurrencies. With Paypal, you can buy and send cryptocurrencies like Bitcoin and Ethereum to another user. Cash App, on the other hand, only supports Bitcoin.
Use a Crypto Gifting Service
Use the Paper Wallets
You can also gift cryptocurrency using a paper wallet. These are meant for one-time use and consist of a piece of paper with private key codes written. You can also generate a paper wallet online by visiting a website such as bitaddress.org or walletgenerator.net, which helps you generate a printable document with QR codes for easy transfer. The recipient can transfer the cryptocurrency to their wallet by scanning the QR code.
Purchase Hardware Wallet
Another option is to load a hardware wallet with cryptocurrency and gift it to the recipient. You can purchase hardware wallets from stores like Best Buy and Walmart. These wallets are USB drive devices that store private keys offline. After purchasing the wallet, you can transfer the cryptocurrency to this device through your laptop.
Create Software Crypto Wallets
You can also gift a cryptocurrency through software crypto wallets. These wallets can be downloaded on PC or mobile devices. After downloading the wallet, you need to set up an account, and the app generates a 12-24 word seed phrase corresponding to your private key. Afterward, you can transfer the crypto from your wallet to this wallet and gift the seed phrase to the recipient to recover the cryptocurrency.
Things to Look Out for When Gifting Cryptocurrency
Beware of Gas Fees
Crypto transactions come with fees, and Ethereum's gas fees can be particularly high. These fees are added for digital validation and can skyrocket during network congestion. To avoid high costs, it's best to monitor the network activity and plan your transactions during periods of low demand.
Wallet Compatibility Issues
Some digital wallets are specific to certain cryptocurrencies. Before sending any crypto, ensure your wallet is compatible with the cryptocurrency you will gift.
Double Check Wallet Address
Once you've found the compatible wallet, double-check the recipient's wallet address before sending any crypto. Crypto transactions are irreversible, so you must send the funds to the correct address.
Cryptocurrencies are susceptible to theft and hacking, so storing them safely is essential. Crypto can be stored in a platform or exchange, but this can be risky since hackers often target these platforms. Thus, keeping your cryptocurrencies offline in a hardware wallet is highly recommended.
Cryptocurrencies have tax implications; how much you have to pay is determined by the amount and remaining lifetime exclusion you have.
Cryptocurrency gifts are taxed similarly to stocks or bonds. But, there is no gift tax if it's under $17,000 for singles and $34,000 for couples per year (as of 2023). If the amount exceeds that, you must report the excess on your tax return, which will count against your lifetime basic exclusion. However, the lifetime exclusion amount is about $12.92 million as of 2023, and you still won't pay gift taxes unless you use all of it.
But, the receiver has to bear the capital gains tax if s/he sells. In the USA, the IRS considers cryptocurrency property rather than currency. So, any gains or losses on the asset are subject to capital gains tax.
Recipient's Knowledge About Cryptocurrency
Ensure the recipient has enough knowledge about cryptocurrency and how to use it before gifting them. A thoughtful gift can quickly become a headache if the recipient doesn't know how to manage it. So, it's crucial to educate them about the basics of cryptocurrency and help them set up their wallet.
Gifting cryptocurrency can be a unique and memorable gift for your loved ones. However, it may not be a suitable gift for everyone since it's a new and can be highly volatile. Thus its crucial to determine if the recipient is interested in and knowledgeable about cryptocurrency before gifting it to them. If they are, it's a great gift to introduce them to digital assets.
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