The once marginal idea that political candidates would receive campaign donations via Bitcoin or other virtual cryptocurrencies is entering mainstream.
Rep. Democrat of the United States in Kissimmee Darren soto, as much a centrist Democrat as one might find in Florida – but whose interest in blockchain technologies runs deep – welcomes crypto donations in its 2022 election campaign.
He joins a list that started with extreme, mostly right-wing candidates, like US Republican Sen. Rand Paul from Kentucky and Republican candidate for Congress Laura loomer of Lake Worth, as well as libertarians and some techies, such as Democrat Andrew Yang from New York and Matt west from Oregon.
Soto’s interest stems from his position as co-chair of the Congressional Blockchain Caucus, a bipartisan group promoting blockchain technologies that led to Bitcoin and other cryptocurrencies. Another co-chair of this caucus, the Republican representative of the United States. Tom emmer of Minnesota, is also accepting donations from the Bitcoin campaign.
Soto said the caucus valued “welcoming new types of currency.”
“In addition, for Forum of the future (another congressional caucus chaired by Soto), this is an exciting new financial asset for young people. In fact,â¦ 45% of those who use cryptocurrencies are millennials and 13% are Gen Z, âSoto added.
âIt’s also about being competitive in the future. As these young people age and contribute more, we want to make sure we are well positioned, âhe said of his re-election campaign in Florida’s 9th Congressional District, covering Osceola County, the southern Orange County and eastern Polk County. .
Other campaigns are trying it, including the Democratic representatives of the United States. Eric swalwell from California and Ritchie torres of New York, Republican Senator of the United States. Cynthia lummis of Wyoming, and Republican US Rep. Jeff Duncan from South Carolina.
âIt’s kind of a ramp-up in terms of the number of candidates. It was sort of that symbol of libertarian ideology, or just a fringe position. But I think the general public has become more informed and familiar with cryptocurrencies, campaigns too, âobserved Austin graham, legal advisor to Legal center of the countryside, a watchdog of national and non-partisan elections.
âThat being said,â Graham said, âit’s still not like every candidate for federal office is now taking Bitcoin.â
The legality of cryptocurrency contributions to federal political campaigns is generally accepted. But it is not fully resolved by the Federal Election Commission, especially regarding the details. There were no Commission hearings or votes, just one advisory opinion, answering one question.
As the practice emerges, so do the concerns raised by election watchdogs, including the Campaign Legal Center. They worry about the whole point of cryptocurrencies – anonymity – undermines at least one of the core values ââof campaign finance laws: the transparency of who is donating. They are also concerned that the fluctuating value of cryptocurrencies will make it difficult for campaigns to comply with strict contribution limits.
In 2014, the FEC proposed an advisory opinion to a political action committee saying the PAC could receive donations from Bitcoin, provided it carefully documents who contributed, quickly converts the cryptocurrencies to dollars to set value, and follows all other donation rules .
That was it.
The FEC has not yet clarified whether this advisory opinion would also apply to candidate campaigns; whether donations to candidates should be limited to $ 100 like cash, or $ 5,600 like checks; or whether the policy could be extended to other cryptocurrencies, which didn’t exist much in 2014 but are booming now.
Starting with Paul and a few others in 2016, some federal candidates decided to read broad interpretations in the 2014 FEC advisory opinion, including that it could be extended to fundraising candidates, and that donations could be at most – $ 2,800 for a primary and another $ 2,800 for a general election.
In the 2018 and 2020 election cycles, crypto donation options remained a novelty, pursued by what some observers have called the margins of politics. As of today, up to 25 federal candidates and groups, including Soto, have opened their campaign coffers to cryptocurrencies, Business Insider reported last month.
Soto received at least one Bitcoin donation from an individual in California at the end of July. It was for 0.070053 Bitcoins, which when the campaign converted and accepted it was reported to be worth $ 2,800. As of Friday, that sum of Bitcoin would have been worth $ 3,298 at the most recent exchange price, according to Coindesk.com.
Soto said it will take some time for donations from crypto campaigns to spread, as many people still have a lot to learn about cryptocurrencies.
âIt’s a new technology and we have to fight against a lot of ignorance. Overall, we haven’t received a lot of cryptocurrency donations yet, although we hope so, âSoto said. “I would say it’s more about looking to the future.”
According to Center for Public Integrity, democratic technologist Brian Forde from California raised nearly half a million dollars worth of Bitcoin for its unsuccessful bid for a congressional seat in 2018.
Tracking Bitcoin contributions to campaigns is not easy. The FEC wants them to be listed as in-kind contributions. Information that a transaction involved Bitcoin only appears in the footnotes of campaign fundraising reports.
âThe question of transparency arises in the context of identifying contributors to a political campaign. Bitcoin is designed to be anonymous, with accounts identified only by Bitcoin addresses and user aliases. This differs from contributions through tools from banking institutions like checking accounts and credit cards, which are highly regulated and require individuals in these accounts to be identifiable, âsaid Pete Quist, deputy research director for the non-partisan monitoring group OpenSecrets.
Campaign treasurers are responsible for identifying donors, declaring names and confirming contributions. But checks on Bitcoin transactions cannot be confirmed by regulated financial institutions like with checks or credit cards, Quist noted.
This opens up the prospect of phantom donors, a growing concern at a time of fears of foreign interference from countries like Russia. The original source of the money may not be traceable.
âIt’s not totally perfect, just because the underlying technology requires campaigns to gain an extra layer of trust,â Graham said.
Soto defended transparency, noting the donor has yet to be identified.
As it stands, the advisory opinion of the FEC makes the acceptance of cryptocurrencies complicated. Campaigns should have a separate system in place to collect donor information. They have to convert the currency into dollars. And if that results in too much money because of the current exchange rate, they have to refund the difference.
âThey have to comply with these transactions like any other contribution. The name, address and profession of the person must appear on it. It is converted from cryptocurrency to dollars at the time of contribution, so there is no doubt about the value on this. So I think those are two important rules, âSoto said. âThey were approved by the FEC. I obviously have a compliance company that helps me manage my campaign finance issues. There are obviously other members who have received cryptocurrency.
At the state level, many states rely on the advice of the FEC, others take no position, while still others set their own rules. Tennessee has passed a law legalizing Bitcoin donations and setting out rules for them. California has banned donating Bitcoin in state and local campaigns.
âI thought it was interesting because, you know, Silicon Valley and the image of California at the forefront of technological issues,â Graham said. âBut their election agency said, ‘It’s just too complicated and there are too many opportunities to get around the transparency rules, and we’re just going to say it’s not allowed at this point.’â
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