The next time you go to a birthday party or holiday gift exchange, you may be able to bring something unique to the table: Cryptocurrency. In fact, 17% of American adults say they have invested, traded or used a cryptocurrency as of 2023, according to the Pew Research Center, which means gifting a fraction of Bitcoin or Ethereum could be a potentially unique present for the right person.
That’s not to say gifting crypto to someone doesn’t change the underlying volatility of the asset. In a lot of ways, gifting crypto is like giving someone a lottery ticket since the recipient may end up with much more — or less — than expected.
Here is how to gift crypto and what you should know.
4 ways to gift crypto
Investors are generally advised to be extremely cautious when it comes to investing in any type of crypto. This is because cryptocurrencies aren’t backed by hard assets or cash flow of an underlying company, making their prices entirely driven by what other investors are willing to pay for crypto coins.
That said, if you’re interested in gifting crypto, here are four ways to do so.
1. Crypto exchange
Crypto exchanges, like Coinbase or Kraken, are one of the most straightforward ways to gift crypto. You can buy the coins directly from a crypto exchange and send it to the recipient’s digital wallet if they have one. Some exchanges even have digital wallets built within the platform.
Exchanges often charge fees for transactions though, which can impact the overall cost of sending gifts. With Coinbase, for example, you’ll pay a spread markup of 0.5 percent of your trade value on top of a flat fee based on the size of your transaction. Say your transaction was anywhere from $50 to $200, you’d pay a fee of $2.99.
Also, regulatory requirements and compliance measures imposed by exchanges could create delays in the gift-giving process, so keep that in mind.
How to use a crypto exchange: Pick a cryptocurrency exchange, make sure both you and the recipient have accounts there, ask for their wallet address, select a currency and send however much you’d like to give.
2. Peer-to-peer app
Peer-to-peer money transfer apps are also a quick option when it comes to gifting crypto. If you’ve ever sent someone money via Cash App or PayPal, you can also send them cryptocurrencies. With Cash App, you can send Bitcoin, and with PayPal you can send Bitcoin, Ethereum, Litecoin and others.
Fees for these transfers can vary based on the platform. For example, if you’re gifting Bitcoin through Cash App, and spend anywhere from $10 to $100, you may be charged a 2.25 percent fee when you buy or sell the coins.
Typically, these fees cover the cost of processing the transaction on the blockchain and can fluctuate based on how busy the network is, and with more transactions comes slower processing times.
How to use a peer-to-peer app: The process of gifting crypto works similarly to sending money on a peer-to-peer app, such as Venmo. Log into the app, navigate to either the finances tab or payment pad (depending on the app) and choose how much crypto to send and who you want to send it to.
3. Create a crypto wallet
You can also gift crypto through a crypto wallet outside of a crypto exchange, but that takes a bit more expertise because you’ll technically be giving the person the ability to hold the crypto themselves.
- Software wallet
- A software wallet uses software downloaded to a computer to manage and protect your crypto holdings with private keys, which are secret codes that grant access to your digital assets. A web wallet is similar, but uses a software plug-in for your web browser. A mobile wallet uses an app to do the same thing.
- Hardware wallet
- A hardware wallet is designed to store your private keys offline, typically on a USB drive, meaning you can buy crypto on an exchange and then store the coins on the drive.
How to use a crypto wallet: Pick a wallet to use, set up the wallet either within the software or on a storage device and give access to your recipient.
4. Other ways to gift crypto
If you want to bypass some of the more technical aspects of the decentralized finance universe and really hone in on the “gift” aspect of crypto for the recipient, you can go through a platform that offers crypto gifting services.
EarlyBird Crypto, which is in development, helps you gift Bitcoin and Ethereum to minors through a custodial account. You can also give crypto with a gift card through platforms like BitCard or Coinbase, which allow you to load crypto onto a card.
How to use a crypto gift card: Decide what type of crypto gift card you want to give and purchase directly from the provider.
How are crypto gifts taxed?
Like other monetary gifts, you won’t pay taxes when you give crypto unless your gift exceeds certain thresholds. In 2024, the annual gift tax exclusion limit is $18,000 per recipient, meaning if the value of the crypto gift exceeds this amount, the donor has to report the gift on Form 709.
Bottom line
If you’re thinking of gifting crypto, there are a few ways to go about it. If the person you’re gifting to is more tech-savvy, consider setting up a crypto wallet for them or sending a gift to their existing wallet. If you want to keep it simple, look at buying crypto on an exchange or send them crypto via a peer-to-peer app.
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