In 2015, Senator Rand Paul (R-KY) famously became the first presidential candidate to accept campaign donations in bitcoin. But prior to Paul’s appeal to tech-savvy voters, the Federal Election Commission (FEC) approved bitcoin donations amid a number of candidates and political action committees leveraging the swelling interest in the cryptocurrency and accepting bitcoin contributions to their campaigns.
While declaring bitcoin donations to be legal, the FEC also expressed limited guidance as to how bitcoin donations should be treated by a campaign. In a 2014 op-ed penned after the FEC issued guidance, Jerry Brito noted that candidates who accept bitcoin donations are likely using a “middleman” who receives the bitcoin and converts it to U.S. dollars. The campaign never actually takes possession of the cryptocurrency: it is accepting a donation that was sent digitally, just as the vast majority of credit card or Paypal donations are sent. Yet, bitcoin donations are subject to an arbitrary $100 maximum with the idea of curbing untraceable financial support to campaigns. Except, bitcoin donations are traceable, as CNN noted when Senator Paul began accepting them.
Now, however, the Kansas Governmental Ethics Commission has declared that allowing bitcoin donations to candidates in the state would be “too risky.” Allowing that bitcoin is gaining in popularity, Executive Director Mark Skoglund cited concerns ranging from the technical inability to refund a contribution that might violate FEC regulation to vague misgivings about anonymous lobbyist influence.
Most bizarrely, Skoglund declared “no state ethics commission has issued a ruling allowing bitcoin to be used in state and local elections.” As the state of Kansas does have guidance for in-kind donations that mirror federal regulations, and the FEC has thus far designated bitcoin contributions as in-kind donations, it would seem that an ethics commission in Kansas would need to rule that bitcoin CANNOT be used in elections, rather than granting permission that already exists at the federal level.
The Kansas Governmental Ethics Commission’s concerns are born of a lack of education on the question before them and will limit political speech.
Misconceptions about cryptocurrency being anonymous aside, Brito also points out that many who would donate to a candidate or PAC via bitcoin (or other cryptocurrencies) aren’t only expressing support for a candidate, but also for the crytpoeconomy, itself.
As regulatory bodies the world over attempt to write laws concerning cryptocurrency, it is imperative that those regulators base their efforts on the reality of the cryptoeconomy and not a loose base of hearsay garnered from headlines and commonly held misunderstandings — lest they run afoul of both progress and protected rights.