The Federal Election Commission ruled unanimously Thursday that certain political committees can accept contributions in bitcoins, a digital currency that has gained traction among free-market advocates but drawn criticism for making it easier to sell drugs online.
The decision allows political action committees involved in federal elections to take bitcoin contributions, as long as the donors identify themselves.
The FEC's action adds some legitimacy to the controversial online currency but leaves key questions unanswered, including the maximum amount of a bitcoin contribution and whether the committees can use bitcoins to make purchases.
The limited ruling aimed to “give some guidance to the community … that is not going to raise some of the bigger issues that might accompany a bitcoin transaction,” said Ann Ravel, a Democrat who is the commission's vice chairwoman.
The FEC decided that a $100 contribution limit per person and per electoral cycle was acceptable, but it did not explicitly rule out larger donations.
The six-member commission deadlocked on whether to allow the committees to spend donated bitcoins rather than requiring them to first exchange the currency for dollars.
The FEC also allowed political action committees to invest in the highly volatile bitcoin market.
The new guidance applies to political action committees but not to political parties or candidates.
The Libertarian National Committee said it will continue to accept bitcoin donations regardless of whether they exceed $100.
Executive Director Wes Benedict said such a low ceiling, if ever enforced for political parties, would be inconsistent with cash contribution limits.
“Part of the novelty,” he added, “is the legal ambiguity, and libertarians like to push the limits of the law.”
The Libertarian National Committee has received several thousand dollars in bitcoins, a small percentage of overall donations, he said.
Transparency advocates say the decision was an important step toward ensuring bitcoins could not be used by anonymous donors seeking to skirt reporting requirements.
“I think that the deliberate way that the FEC decided to move on bitcoin was the right thing to do,” said Adam Smith, a spokesman for Public Campaign, a nonprofit group working to reduce the influence of money in politics.
He added that the ruling would allow more time to observe how the new currency might influence the political landscape. “We’re always interested in new ways to get small donors involved in the political process, and I’m wondering if bitcoin is a way to do that," he said.
Along with other agencies, the FEC has struggled to classify the currency. Last fall, the commission deadlocked on a petition filed by a political action committee seeking guidelines on bitcoin contributions.
The FEC found that bitcoins should be treated as a combination of a traditional in-kind donation and a financial asset. In March, the Internal Revenue Service said it would treat bitcoins as property.
The group that filed the petition, Make Your Laws PAC, laid out guidelines to ensure that each donor would be clearly identified and able to contribute only once.
"This is a safe harbor policy," said the group’s president, Sai. "It's a first step."