Considering that it’s one of the few things unaffected by supply chain issues, you might be want to consider gifting friends and family cryptocurrency for the holidays this year. Of course, cryptocurrencies are risky investments due to their volatility, so you’d have to be comfortable with crypto as a “fun” gift that could ultimately prove to be worthless, similar to how lottery tickets are used as stocking-stuffers. Plus, it could be a good gift for someone that’s crypto-curious but unwilling to spend their own money.
First, buy the cryptocurrency
Unless you’re well-versed in crypto trading, your best bet is to stick with mainstream currencies like Bitcoin or Ethereum, and using well-established exchanges like Coinbase or Binance. Some of these, like Binance, offer gift cards that can be sent directly to the recipient. Once received, the recipient would then have to create an account to access the currency.
From there, the recipient would transfer those funds to a dedicated crypto wallet, which stores the crypto securely and allows the recipient to trade the currency. The other option is to buy the currency first, and then place those funds into a wallet that is set up on behalf of the recipient (if the recipient already has a wallet, you simply send money to their wallet’s address) .
How to set up a crypto wallet
Crypto wallets store digital tokens that allow you to make transactions, and they will update a blockchain ledger when transactions are made. A wallet that’s accessible online is considered a “hot wallet,” as it’s more vulnerable to online attacks, although they’re easy and faster to use (CNET has some recommendations here ).
Another option is a “cold wallet,” which offers greater security since it’s accessed offline. The simplest form of this is a paper wallet, using a wallet generator site which will create keys and corresponding QR codes at random (this blog post walks you through the steps). As Investopedia recommends, one of the places to get holiday-themed paper wallets is bitcoinpaperwallet.com .
However, since the paper itself could be lost, stolen, or easily damaged, another option is to provide your recipient with a hardware wallet that is sturdy, waterproof, and password protected. The College Investor has a good round-up of hardware wallets here, and the Trezor Model T and Ledger Nano S are popular choices.
Some tax considerations when gifting crypto
When you can give crypto as a gift, it won’t trigger income taxes. However, when the recipient transfers or sells it, taxes would then apply. And unless you’re insanely rich, you probably don’t have to worry about a gift tax either, as only gifts that total more than $15,000 require you to file a gift tax return (which means that you need to file IRS Form 709 to disclose the gift).