The Federal Election Commission ruled unanimously on Thursday that campaigns and political action committees may accept bitcoin donations much in the same way they currently take in-kind contributions in the form of stocks or artwork.
Make Your Laws PAC, a small start-up that hopes to make it easier for people to donate to campaigns and read advice on who or what they’re funding, prompted the new rules by asking the FEC in February for an official “advisory opinion.”
1) Campaigns can’t buy stuff with bitcoins
A majority of the FEC’s six members could not decide whether to allow candidates and committees to spend the bitcoins they receive as contributions, so for now, they can't. That means that if a committee receives 20 bitcoins, it can’t turn around and give a consultant those 20 bitcoins for his advice on television advertising strategy.
The effect of this de facto bar against spending bitcoins is to keep political transactions in dollars, a far more stable currency. If a candidate paid a consultant in bitcoins worth $100,000 today, the consultant could theoretically hold those bitcoins in the hope that their value increases two, three or more times.
2) No anonymous contributions
Anonymity tends to be a big no-no in political financing, and the FEC didn’t make an exception for Bitcoin, where transactions are public but owners are not. The methods of accepting donations in the alt-currency that were proposed by Make Your Laws and approved by the FEC on Thursday mirror the standard disclosures required by almost all mainstream political campaigns and committees.
The online donation form proposed by Make Your Laws would require contributors to give their name, physical address, occupation and employer. Contributors would have to affirm that they own the bitcoins in question and are not foreign nationals. Make Your Laws would then send them a one-time online Bitcoin address to receive the specific donation. The campaign’s treasurer would be responsible for verifying every donor’s identity.
3) Bitcoins are like stocks or rare art
The FEC said that candidates and campaigns can treat bitcoin donations like stock or art and hold them indefinitely, unlike cash, which must be deposited in a bank within 10 days. Only when they convert the bitcoins into dollars do they have to deposit the money into an account.
There are, of course, aggregate dollar limits on various kinds of political contributions, even stock or art, but while it is comparatively easy to determine the dollar value of a stock or artwork at the time it is contributed, Bitcoin’s novelty and volatility makes this an interesting subject. The currency, which was once valued at more than $1,000 and was worth roughly $440 on Thursday afternoon, has endured several enormous and sudden crashes and is traded 24/7 on a number of unregulated exchanges.
According to the FEC, bitcoin contributed in dollar values would be counted at their converted rate, but if a contributor wants to donate strictly in bitcoin, then the campaign only needs to find a “high-volume public bitcoin exchange that is open to transactions in the United States” to set an approved dollar value. The value of a bitcoin often varies dramatically between different U.S.-available exchanges — on Thursday, there was at least a $20 difference between some exchanges.
4) Keep donations small, for now
The request for opinion by Make Your Laws only asked the FEC for guidance on whether it could receive bitcoin donations worth $100. Conservative attorney Dan Backer told Politico that he didn’t view this as a ruling forbidding larger contributions, but the FEC was clearly not comfortable giving its explicit blessing to bitcoin donations of great size.
Commission Vice Chair Ann Ravel said during the hearing that she saw it as “significant” that Make Your Laws had only asked for guidance on a $100 donation, an “amount of money that is not going to raise some of the bigger issues that might accompany a bitcoin transaction.”
. . . .
Any views expressed on The Scrutineer are those of the author and do not necessarily reflect Al Jazeera America's editorial policy.