A gift that keeps on giving: How to gift cryptocurrency to family and friends

Giving gifts to friends and family is a cherished holiday tradition that involves sharing the wealth we’ve accumulated over the past year (sorry, Scrooge). This is a way to care for and strengthen your relationship with your loved one.

Next, cryptocurrencies are great gifting options. Because giving cryptocurrency as a gift can be an amazing, unique, and rewarding thing for those who enjoy the potential for profit.

And think about what a gift Bitcoin could have been just 10 years ago. Imagine gifting Bitcoin or another cryptocurrency whose value could rise dramatically. (Look at the performance of a cryptocurrency-focused portfolio as an example of what is possible.)

There is no guarantee that the cryptocurrency will continue to grow at the same rate in the future, but it is still a good gift due to its store of value (SoV) status.

In this article, we will discuss how you can gift cryptocurrency to your friends and family this holiday season.

Gift cryptocurrency through an exchange

ease of use: easy

The simplest way to gift cryptocurrency is through a cryptocurrency exchange like Coinbase or Robinhood. If you don’t own any cryptocurrency, you can easily purchase it on one of these cryptocurrency exchanges by paying with a credit card.

Many exchanges offer user-friendly interfaces. Cryptocurrency must be sent to the recipient’s wallet address, which can be provided as a QR code or a series of letters and numbers.

Coinbase and Robinhood, in particular, allow users to gift cryptocurrency to an email address, which the recipient can later request.

Advantages:

• Beginner friendly – The exchange provides a simple and intuitive platform for purchasing and transferring cryptocurrency.
• Diversity – You can access hundreds of cryptocurrencies for gifting, and your recipients can even find ways to exchange those cryptocurrencies without understanding any significant technical knowledge.
• fast transfer – Direct transfers are finalized within seconds or an hour.

disadvantage:

• security – Centralized cryptocurrency exchanges hold your funds online, making them the least secure of the options listed here.
• charge – Some exchanges may charge fees for purchasing or transferring cryptocurrency.
• recipient address – In most cases, you will need to know the recipient’s address before sending a gift, which may reduce the surprise effect. The good news is that Coinbase and other platforms allow users to gift cryptocurrency to their email address.

Gift a cryptocurrency gift card

ease of use: easy

If you’ve ever received a Visa gift card, cryptocurrency gift cards work much the same. Cryptocurrency gift cards can be digital or physical and work just like traditional gift cards. The only difference is that it has cryptocurrency on board.

Gift card recipients can spend the cryptocurrency in their wallet or spend it online. Some exchanges, such as Coinbase and Binance, offer convenient gift card options. Professional services like BitCard allow users to gift Bitcoin in over 150 countries.

Advantages:

• tangible gifts – Real cryptocurrency gift cards are ideal for those who prefer real gifts.
• ease of repayment – Redemption is simple – recipients can transfer cryptocurrencies to their wallet at any time.
• versatility – The card can be used to purchase goods in cryptocurrency-friendly markets.

disadvantage:

• limited availability – Not all cryptocurrencies can be used in gift card form.
• Platform Dependencies – Some platforms, such as Coinbase, require the recipient to use the gift card only on their Coinbase account.

Give a gift through a P2P payment app

ease of use: easy

Existing peer-to-peer (P2P) payment apps like PayPal, Venmo, and Cash App allow users to purchase and send cryptocurrency, making them excellent options for cryptocurrency gifting. PayPal allows you to send BTC, ETH, LTC, and BCH to other PayPal users, your Venmo account, and other cryptocurrency exchanges.

However, you must go through a more elaborate KYC verification process and have a linked payment method. Additionally, most apps currently only allow cryptocurrency trading for US customers.

Advantages

• Convenience – Many people use PayPal or Venmo, and these options only require the recipient’s email.
• versatility – PayPal is accepted as a payment option by millions of merchants, allowing you to pay online using cryptocurrency.

disadvantage

• expense – These P2P apps charge higher fees than cryptocurrency exchanges.
• limited options – PayPal and similar apps only support a few cryptocurrencies.
• limited availability – Only US users can use PayPal and Venmo to transfer cryptocurrency.

Create and fund a software wallet

ease of use: Usual

If you want to give your loved one more direct control over their cryptocurrency, they can set up a wallet and put their cryptocurrency into it. Creating and funding a software wallet is better suited to tech-savvy users and requires more hands-on knowledge from the recipient (knowledge that you may need to provide to them).

First, download a reputable mobile or desktop wallet like MetaMask or Exodus and set up an account. The important part is to securely record your seed phrase, which is a series of 12 to 24 random words needed to recover your wallet.

After setup, you can transfer any amount of cryptocurrency to this wallet. Recipients can access these funds by downloading the same wallet software and entering the seed phrase provided.

This could be a great opportunity to teach a friend or family member how to get started using cryptocurrency.

Advantages:

• under complete control – Recipients have full control of their funds.
• DeFi Access – If your friend is familiar with cryptocurrencies, you can explore DeFi earning opportunities.
• Wide range of cryptocurrencies – Thousands of cryptocurrencies to choose from.

disadvantage:

• complexity – This approach requires technical know-how to set up and use the wallet.
• responsibility – Protecting your seed phrase is important. Lost funds cannot be recovered.

Learn more about our favorite cryptocurrency wallets.

Give a paper wallet as a gift

ease of use: difficult

Paper wallets are an interesting way to offer cryptocurrency. A paper wallet is a cold wallet in which the wallet’s secret keys are printed on paper and stored by the user. The tokens in that wallet are removed from the network, “stored” in the wallet, and can only be accessed via a printed key.

The name “paper” is a bit of a misnomer in that it can be made of paper, metal, or any material on which keys are printed. Cryptosteel, for example, offers cold wallets made from steel, which is much more resilient and sturdy.

The great thing about this gift is that it is physical and personal (or at least personalized). This may represent a more stable gift in that the user is essentially gifting a cryptocurrency wallet that can be stash away like an investment.

Advantages

• Customized – Paper wallets can be personalized in every way possible.
• security – Paper wallets require more accountability but are safer because they store your cryptocurrencies offline.

disadvantage

• complexity – Beginners may not know what to do with a paper wallet. This records a private key or seed phrase, and the recipient must transfer their cryptocurrency funds to some software wallet to use it.
• responsibility – If the cold wallet is lost, all cryptocurrency funds will be lost, so the recipient must keep the cold wallet safe.

Give the gift of a hardware wallet

ease of use: difficult

A more popular form of cold storage is hardware wallets, such as those offered by Ledger or Trezor. These devices store your crypto funds offline and can be connected to native apps or other apps via a USB port.

Before gifting a hardware wallet, you’ll need to purchase the device online, set it up, and deposit your cryptocurrency into it. The entire process, including shipping, may take several days.

Advantages

• security – Hardware wallets are considered the most secure wallets, but Ledger recently experienced a large-scale security breach.
• control – Hardware wallets give users full control over their cryptocurrency holdings.

disadvantage

• expense – Expect to pay $50 to $200 per hardware wallet.
• complexity – Setting up and using this wallet requires some knowledge.
• responsibility – Just like paper wallets, hardware wallets should be stored in a safe place.

Learn more about cryptocurrency hardware wallets.

What about taxes on cryptocurrency futures?

In the United States, cryptocurrency futures are subject to similar tax regulations as stocks or bonds. In 2023, gifts under $17,000 will be exempt from gift tax. In 2024, the exemption limit will increase to $18,000. This exemption applies until the recipient decides to sell the cryptocurrency. For gifts exceeding this amount, you must file a gift tax return using Form 709. This includes accumulated small gifts that exceed the annual exemption limit.

Learn more in our cryptocurrency tax guide.

Investor Implications

The joy of giving can surpass the joy of receiving. Gifting cryptocurrency to your loved ones is both a creative act and an investment in your financial future. Whether you choose cryptocurrency exchanges, gift cards, payment apps, or more secure options like software and hardware wallets, each method offers unique benefits.

Bitcoin’s significant growth over the past five years has highlighted the cryptocurrency’s potential as a valuable gift, but it is important to remember the tax implications for gifts exceeding the prescribed amount. Don’t give more than you are prepared to spend, and remember that you are giving someone an investment, not cash.

Gift them a great investment. It is a gift that keeps on giving.

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