How to Give Bitcoin or Another Cryptocurrency as a Gift

Cryptocurrency may be the gift that keeps on giving.

If you're looking for a gift that's both different and practical, cryptocurrency could be a great option. Over 14% of Americans already own cryptocurrency and digital currencies edged even further toward mainstream adoption in 2021.

However, it won't be the right gift for everybody. Before we get into how to buy crypto as a gift, let's first consider some of the pros and cons of gifting digital currencies.

Pros:

• Crypto can be versatile. More and more stores accept crypto payments, so a gift of Bitcoin (BTC) might be more versatile than a normal gift card. If the recipient doesn't want to keep it as an investment, they can spend it or trade it.
• This could be a gift that keeps on giving. Many people see cryptocurrencies as a form of investment. In time, your crypto gift might increase in value. If the gift recipient chooses to hold the crypto long term, you never know what it might be worth in a few years.
• You can gift any amount of crypto. A single Bitcoin is worth around $50,000 right now, but you don't have to buy a whole Bitcoin (or any other coin). In fact, you can give someone as little as $1 worth of BTC. The transaction fees might make that impractical, but it’s possible.
• There are no supply chain issues. As stores and suppliers struggle to keep up with demand, there's no chance of your crypto gift being out of stock or stuck in a warehouse somewhere.

Cons:

• Cryptocurrencies can be extremely volatile. A $100 gift of crypto might be worth $80 by Christmas day, only to increase in value again before the new year. Be aware that 2022 will bring a lot of unknowns for crypto, such as regulation that could have a big impact on prices.
• Crypto isn't for everybody. Some people aren't interested -- or actively don't believe in -- these digital assets. While they could just convert your crypto gift back into dollars, there are transaction costs involved. And if they are not very tech savvy, you probably don't want to give them that additional hassle.
• It may not be as simple as it seems. In some cases, the recipient will need a cryptocurrency exchange account to receive the gift. These are relatively easy to open, but it's worth considering the recipient. If they already struggle to keep track of multiple passwords, they may not want yet another account to manage.
• There may be tax implications. Giving crypto as a gift is not a taxable event. However, if the recipient goes on to sell that crypto for a profit, they will have to pay tax on those gains. Keep track of what you paid for the crypto and what it was worth when you transferred it as this will help with any tax reporting.

How to give cryptocurrency as a gift

If you've weighed the pros and cons and are sure you want to go ahead with a crypto gift, follow these steps to make it happen.

1. Decide on which cryptocurrency you want to give

There are thousands of different cryptocurrencies on the market. But it makes sense to stick to the better known coins like Bitcoin, Ethereum (ETH), Cardano (ADA), or even Solana (SOL) as a gift. You might also consider a stablecoin -- a crypto that's pegged to a commodity like the U.S. dollar -- which has lower transaction fees.

The cryptocurrency market is relatively new and untested, and there's a good chance only a limited number of tokens will survive in the long term. Given that the lucky recipient of your crypto gift may not want to actively trade it, a more-established coin or stablecoin is a better bet.

2. Decide how you want to gift your crypto

There are a few different ways to gift crypto -- just as there would be if you were giving someone cash. You'll need to buy the cryptocurrency before you gift it:

• You can use a crypto exchange. If the person you are buying for already has a crypto wallet, you can simply send crypto to their public address. You'll need to ask them for the address, so it may not work if you want to surprise them. Some crypto exchanges like Coinbase and Binance also have gift cards, but the recipient will need to open an account to use the gift.
• You can get a crypto gift card. There are a few different platforms that sell crypto gift cards. Make sure you research them carefully -- gift card platforms are rife with scams. Look for reviews online and only buy from a site you trust.
• You can use a paper wallet. Cryptocurrency transactions involve a public and private key. The public key is like your bank account number, and the private key is a bit like your PIN. A paper wallet is essentially a secure way of printing the key on a piece of paper (often using a QR code). The recipient can scan the code and move the crypto into a wallet of their choosing.
• You can use a hardware wallet. If you are buying for a crypto enthusiast, a physical hardware wallet might be a great gift in itself. These are small devices that are kept offline, so they're less likely to get hacked.

3. Get ready to explain crypto to your friends and family

If the lucky recipient of your crypto gift doesn't yet know their blockchain from their supply chain, you might have some explaining to do. The most important thing is to make sure your recipient understands how to securely store their crypto gift -- and where they can learn more if your present has got them interested.

Cryptocurrency gifts won't be right for everybody. But if you're an enthusiast who wants to put some crypto under the Christmas tree, the steps above will help you do it.