FEC Will Consider Allowing Bitcoin Donations to Political Campaigns

Could virtual currency be the next form of campaign clout?

A man talks on a mobile phone in a shop displaying a bitcoin sign during the opening ceremony of the first bitcoin retail shop in Hong Kong on February 28, 2014.
National Journal
Dustin Volz Alex Brown
April 22, 2014, 12:55 p.m.

{{ BIZOBJ (video: 4876) }}

Who needs cam­paign cash? If one group gets its way, elec­tions of the fu­ture might soon be fun­ded by bit­coin.

The Fed­er­al Elec­tion Com­mis­sion will re­view a re­quest Wed­nes­day to al­low polit­ic­al cam­paigns to ac­cept bit­coin dona­tions in the 2014 midterm elec­tions.

The con­sid­er­a­tion ar­rives amid rising de­bate on how to reg­u­late the pop­u­lar — and po­lar­iz­ing — di­git­al cur­rency, and it could present new ques­tions re­gard­ing dona­tion lim­its and donor an­onym­ity in fed­er­al elec­tions.

It could also add fuel to to a ra­ging de­bate between bit­coin de­votees — who view their de­cent­ral­ized, un­reg­u­lated cur­rency as a le­git­im­ate new form of trans­ac­tion — and those who see it as a shady way to cir­cum­vent mon­et­ary stand­ards.

For now, the bit­coin-for-cam­paigns pro­pos­al is mod­est. Its back­er, Make Your Laws, is hop­ing to gain ap­prov­al for its own spe­cif­ic activ­ity rather than es­tab­lish­ing blanket re­quire­ments for all bit­coin activ­ity on the polit­ic­al spec­trum. Among its pro­pos­als:

  • Con­tri­bu­tions would be lim­ited to $100;

  • Con­trib­ut­ors must provide their name, ad­dress, oc­cu­pa­tion, and em­ploy­ers (bit­coin trans­ac­tions in­de­pend­ent of this pro­pos­al of­fer an­onym­ity);

  • Donors must con­firm that the bit­coin they’re donat­ing is their own;

  • Make Your Laws will ac­cept dona­tions by cash­ing out in U.S. dol­lars, based on bit­coin’s mon­et­ary value at the time.

If the plan gains ap­prov­al, said Sai, the group’s mononym­ous lead­er, oth­er cam­paign en­tit­ies will likely fol­low the guidelines it set forth. Over time, though, as oth­ers push the lim­its, bit­coin al­low­ance could open the floodgates to a host of cam­paign fin­ance conun­drums.

Be­cause bit­coin is treated as prop­erty rather than cur­rency, donors could be con­fused about wheth­er the FEC’s dona­tion lim­its ap­ply. On top of that, its ever-fluc­tu­at­ing value could lead someone to donate a high­er or lower dol­lar amount than they ac­tu­ally in­ten­ded — in­clud­ing a pos­sible lim­it vi­ol­a­tion if the dol­lar value goes up soon after a dona­tion.

Cam­paign trans­par­ency is­sues could also be at play, as back­ers of the an­onym­ity-based cur­rency meet the cam­paign world, where donor dis­clos­ures are of­ten re­quired.

Make Your Laws is a polit­ic­al ac­tion com­mit­tee, which, among oth­er things, seeks to end Amer­ica’s re­pub­lic­an form of gov­ern­ment in fa­vor of a proxy-based “li­quid demo­cracy.”

“This was just re­spond­ing to re­quests from po­ten­tial con­trib­ut­ors about wheth­er they could con­trib­ute with bit­coin, same as any oth­er pay­ment meth­od,” Sai said.

Wed­nes­day’s re­view comes just months after the agency dead­locked 3-3 on a sim­il­ar pro­pos­al brought by the Con­ser­vat­ive Ac­tion Fund. No new guidelines were is­sued then, when all three of the FEC’s Demo­crats voted down the idea. But Com­mis­sion­er El­len Wein­traub, among the Demo­crat­ic co­hort, noted at the time, “We have not seen the last of bit­coin at the FEC.”

What’s dif­fer­ent this time around? Make Your Laws be­lieves it has more clearly spelled out how it would track who is mak­ing bit­coin con­tri­bu­tions, and the FEC will weigh two pro­pos­als based off the group’s pe­ti­tion. The first would ap­prove the use of bit­coin as in-kind dona­tions to fed­er­al cam­paigns, akin to stocks or bonds, which could then be used dir­ectly to pay for ex­pendit­ures. The second would al­low bit­coin dona­tions but re­quire them to be con­ver­ted in­to dol­lars with­in 10 days, set a $100 cap on each donor per cycle, and not al­low dir­ect ex­pendit­ure pay­ments.

Sai said he doesn’t ex­pect a fi­nal vote Wed­nes­day but is hope­ful that the FEC will look at pro­posed re­vi­sions to pre­vi­ous drafts. The com­mis­sion has asked for an ex­ten­sion un­til May 5, which Make Your Laws is pre­pared to grant. “It de­serves to be well thought through,” said Sai. Will it even­tu­ally be ap­proved? “After some fur­ther dis­cus­sion, yes,” he pre­dicted.

If the FEC al­lows bit­coin, Sai said, it could lend sta­bil­ity to the oft-volat­ile cur­rency as it sees more use for trans­ac­tions rather than spec­u­la­tion.

Bit­coin is the most pop­u­lar brand of a grow­ing num­ber of de­cent­ral­ized di­git­al cur­ren­cies that can be ex­changed for tra­di­tion­al dol­lars or spent at a grow­ing num­ber of on­line and brick-and-mor­tar vendors.

Its sup­port­ers say bit­coin and its cous­ins are a fast, in­nov­at­ive way to pay for goods and ser­vices while avoid­ing fees typ­ic­ally as­so­ci­ated with on­line trans­ac­tions. Skep­tics see it as an easy and an­onym­ous way to en­gage in money laun­der­ing or drug traf­fick­ing.

Earli­er this month, At­tor­ney Gen­er­al Eric Hold­er told Con­gress that vir­tu­al cur­ren­cies could “con­ceal il­leg­al activ­ity.”

Already some politi­cians have said they would al­low bit­coin dona­tions to their cam­paigns, in­clud­ing Rep. Steve Stock­man of Texas, who ran an ill-fated Sen­ate cam­paign, and Texas At­tor­ney Gen­er­al Greg Ab­bott, who is run­ning for gov­ernor. No fed­er­al law cur­rently bars the use of vir­tu­al cur­ren­cies in elec­tions.

Stock­man also an­nounced earli­er this month plans to in­tro­duce le­gis­la­tion that would re­quire the IRS to treat bit­coin as cur­rency rather than prop­erty for tax pur­poses, which would re­verse a re­cent rul­ing from the agency.

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