As someone who has a keen interest in cryptocurrency and has a history in political campaigning, I am one of those peculiar animals who knows Federal campaign finance laws and enjoys learning new things about them.
[Disclaimer: I am not a campaign finance lawyer. I’ve been a journalist for far longer than I was involved in campaign finance. My interpretation should not be taken as anything other than informed opinion. For best advice, seek an actual lawyer who specializes in campaign finance.]
As such, I’m happy to convey the news this week concerning US FEC guidelines around crypto-donations to federal campaigns. In short, the government says “OK.”
The US Federal Election Commission (which exclusively governs national election campaigns) has released a proposed draft that addresses Make Your Laws’ inquiry regarding Bitcoins.
Make Your Laws, an organization that facilitates political contributions, previously submitted a petition asking for Bitcoin contributions of up to $100 for campaign to be permitted. The decision regarding the matter was delayed as Bitcoin has raised many questions, specifically anonymous donors.
The proposed draft states that Bitcoin can now be accepted as campaign donations and the digital currency will be considered as in-kind contributions like stocks and art. This is great news for election candidates as it gives them more avenues for accepting donations, and could potentially allow them to tap into a new community of contributors. And this is even better news for politicos who are already accepting Bitcoin donations, even without the FEC’s consent, as everything becomes above board and less questionable.
But whether you’re an election candidate who’s elated by this news, or someone who wants to donate using Bitcoin, there are some things you need to know first.
Like all political donations, they won’t be anonymous
When donations are made in cash, political action committees are required to deposit that amount in a campaign depository within 10 days upon receipt. Since Bitcoin will be treated as an in-kind contribution like art or stocks, it can be held in a Bitcoin wallet indefinitely, but once it is liquidated, the amount should be put in a campaign depository.
MYL will handle Bitcoin donations and will require details like the name, physical address, occupation and employer of the Bitcoin donator. This is so it can verify that the amount being donated is legal, comes from an American citizen, and that the contributor is the owner of the digital currency being donated. MYL will then provide a one-time Bitcoin address for the candidate to accept the digital currency.
You can’t spend it, directly.
The FEC proposed draft stated that PACs can purchase Bitcoins using campaign funds for investment purposes, but the digital currency cannot be used to pay for anything campaign-related. It cannot be used to pay for services rendered by a campaign team or pay for campaign materials or ads. What they need to do is turn Bitcoins into dollars by selling them, put in the campaign depository, which can subsequently be used for disbursement.
Sai, the president of MYL, told us: “The reason for this has nothing to do with Bitcoin’s volatility, but
rather with a nuance of election law — whether it’s in-kind or
currency. The final draft (unlike drafts A & B) very carefully does
not actually say either way (though it says it should be reported like
in-kind and can be held like in-kind). If it were fully treated like
in-kind, then previous AOs create precedent that would allow it to be
used for barter, and they couldn’t come to an agreement on that, so
the opinion walks a fine line to avoid opining on it.”
For now, MYL advises contributors to keep Bitcoin donations small, about $100 worth as it is an “amount of money that is not going to raise some of the bigger issues that might accompany a Bitcoin transaction.” It should be noted that MYL is only providing their interpretation on the guidance; the $100 of crypto shouldn’t be seen as a legally binding limit, only the limit they sought approval for.
Because Bitcoin exchange markets are open 24/7, its value is constantly fluctuating. Therefore, the the FEC’s final AO suggests that PACs should value Bitcoin contributions based on the market value of the digital currency when the contribution was received.
Reporting and monitoring
Receiving Bitcoin contributions should be reported like any other in-kind contributions, and if the Bitcoins are sold, it is the PAC’s duty to report how much the Bitcoins were sold for. The same rule applies for Bitcoins purchased using campaign funds. The amount of Bitcoin purchased, how much money was used to acquire it, and how much money was received when the digital currency is once again sold, should all be reported.
It should also be noted that any transaction fees which arise from the use of Bitcoin should not be deducted from the original value of the contribution.
“The Committee must treat the full amount of the donor’s contribution as the contributed amount for purposes of the limits and reporting provisions of the Act, even though the Committee will receive a lesser amount because of [the] fees,” the proposed draft stated.
tl;dr: Accepting Bitcoin in campaigns is more complex than sending it.
It should be noted that the Federal regulations may be used as guidelines in state affairs, they do not directly apply as the Federal regulations only govern national elections (Presidential, Congressional and otherwise). I should also not that there have been several instances of politicians taking Bitcoin for political donations prior to the guidance from the FEC, and at least one who has since.