Just in time for the 2014 midterm elections, the Federal Election Commission has voted to allow political action committees to accept campaign contributions in the form of bitcoin.
In a unanimous vote, the six-member commission approved a request from a PAC called Make Your Laws to allow bitcoin donations of up to $100 per donor per campaign.
The bitcoin funds will be considered in-kind contributions — similar to stocks and bonds — and the amount will be based on the value at the time of donation. While the committee can decide whether to cash out immediately or hang on to the bitcoin as an investment, they must convert it into US dollars before depositing it into a campaign account or spending it. Addressing concerns of anonymity, the FEC ruled that detailed information about the donor must be reported.
There are no laws prohibiting the use of bitcoin as political donations, but the cryptocurrency’s use was up in the air after the FEC was split in a November vote on whether campaigns could accept it.
FEC Chairman Lee Goodman remarked that the shift from a deadlock to a unanimous vote came after the commission “had time to become more familiar and comfortable with bitcoins and the notion of an alternative medium of exchange.”
Make Your Laws specified the $100 limit in its request, along with an outline for a system to ensure donations are traceable. Though the price fluctuates day to day, one bitcoin is currently valued at $450. Its value is divisible to the eighth decimal, allowing for fractional donations.
David Mitrani, an associate at Sandler Reiff Lamb Rosenstein & Birkenstock who attended the hearing, told VICE News that the FEC has laid out a clear path for accepting bitcoin contributions. But he says it won’t be as simple as a PAC saying they want to accept the system. For example, they’ll have to implement a new software program to accept and legitimize the funds.
“Without a doubt, this is a burdensome compliance regime,” he said. “To me it’s an invitation for a headache.”
Between the compliance guidelines and dealing with bitcoin’s constantly fluctuating value, campaigns may find it too complicated to deal with the system.
Mark Williams, a finance professor at Boston University, told VICE News that the libertarian movement is the fastest-growing segment of bitcoin users. He described bitcoin users as “90 percent male, typically white, libertarian, anarcho-capitalists.”
“There aren’t really compelling economic reasons to accept bitcoin,” Williams said. “It’s an administrative nightmare for campaign treasurers.”
Campaign treasurers will be in charge of determining the legitimacy of a bitcoin contribution, and they’ll be responsible for reporting any questionable activity. The treasurer will also decide whether or not to hold onto bitcoin as an investment.
“If they accept bitcoin, they’re in the commodity trading business,” Williams said, noting that the system's value can change up to 10 percent in a single day. “It’s like a game of hot potato.”
There was even some disagreement among committee members after they announced the decision. The Democrats were adamant that the decision meant donations were not to exceed $100.
“Clearly, for me it’s significant that the requester has only asked for $100 in bitcoin contributions,” said Ann M. Ravel, the vice chairwoman of the commission. “And so it is good that we can give some guidance to the community in respect to that amount of money that is not going to raise some of the bigger issues that might come with bitcoin transactions.”
Republicans on the commission, however, appeared to regard the $100 limit as specific to the Make Your Laws request.
“The only statutory [authority] that I have as a commissioner to limit contributions to $100 is currency of the United States, and a bitcoin is not currency,” Goodman told The Hill. “There is no legal authority to limit bitcoin contributions to the $100 that this requester volunteered to do.”
Mitrani says the dispute shows that committees could request higher allowances with the FEC, but the disagreements signify that a tie vote could result in such a case.
“It’s a good example of only answering the question that was asked,” Mitrani said, of the $100 limit. He thought the safest thing to do would be to match the system that Make Your Laws requested.
Williams believed that many campaigns will find that the complicated logistics may not be worth it for a cryptocurrency that goes hand-in-hand with online networks like Silk Road.
“From a political standpoint, they need to manage their brand,” he said. “Imagine being associated with a bitcoin contributor that turns out to be shady. That could ruin a political career.”
Furthermore, it’s worth questioning whether bitcoin’s most loyal users will give up one of the currency’s principal advantages — anonymity.
Follow Kayla Ruble on Twitter: @RubleKB
Photo via Flickr