Bitcoin campaign donations have regulators scratching heads
WASHINGTON — On the website for Jim Fulner’s U.S. Senate campaign, 34 letters and numbers appear in a string above the “Donate Now!” button.
They are the code for his campaign’s bitcoin wallet, where holders of the so-called digital currency can send it to the Libertarian from Michigan — without a bank acting as an intermediary.
“It’s an exciting new technology,” said Jeff Wood, the campaign treasurer and a self-described early adopter of bitcoin.
But as with any budding technology, federal agencies must examine how its use fits in with the law, including rules for campaign donations. The Federal Election Commission discussed the technology last week, while federal regulators and experts testified about it before two Senate committees.
The FEC plans to revisit the topic in the next year and may issue a set of rules. But the technology, embraced by some high-profile entrepreneurs who have invested in it, is already being accepted by the national Libertarian Party and some local chapters and candidates.
Wood says the Fulner camp has received just two bitcoin donations so far — one from Wood. Both were less than the $200 threshold over which donations must be reported to the FEC. The Libertarian National Committee has received several thousand dollars in bitcoins from dozens of donors, executive director Wes Benedict said.
The FEC and other federal agencies have recognized that bitcoins hold value — they can be exchanged for goods and for dollars online — but continue to debate whether campaigns can treat them as currency.
“What they need to know is how to handle them, and how to account for them, and how we want to see them reflected on their public reports,” Lee E. Goodman, the FEC’s vice chairman, said at last week’s meeting.
Bitcoins were created in 2008 by a programmer or group of programmers using the pseudonym Satoshi Nakamoto. They are transferred online without a central bank. About 12 million bitcoins exist today.
The transactions, although viewable in a public ledger online, are not tied to a person’s identity, as checks or credit cards are. That degree of anonymity made bitcoin the payment of choice on Silk Road, the website shut down last month that was likened to an eBay for drugs and other illegal activities.
“Bitcoins do raise some very interesting questions about whether disclosure can be adequately done,” FEC Chairwoman Ellen L. Weintraub said last week. “And I’m not prejudging the answer to that.”
Advocates for more disclosure in campaign donations are troubled.
“We’re always interested in new ideas like this that can bring new people into the political process — that I think bitcoin donations could,” said Adam Smith, a spokesman for Public Campaign. “But there are some questions about transparency with these donations. We need to make sure those are addressed so that bitcoin donors can’t hide behind donations to remain anonymous.”
Bitcoin proponents say there is no fundamental difference between a payment with bitcoin and one with a prepaid money card or a gift card that is not tied to a person’s identity. In those instances, the onus is on the campaign or committee to get accurate donor information.
“It’s not just the FEC requirement,” said Dan Backer, an attorney who put the issue before the commission when he asked for guidance on behalf of the Conservative Action Fund PAC. “We’re going to ask for this stuff anyway because we want to build a relationship with every donor.”
Supporters have also noted that exchange sites, such as BitPay, which is used by the Libertarian National Committee to exchange its bitcoin contributions for cash, can allow bitcoin recipients to require certain information from donors, or else the contribution is rejected.
With any technology, criminals are often first to see its potential, said Jerry Brito, a senior research fellow at George Mason University’s Mercatus Center. He cited email, cameras and 3D printers as examples of innovations that criminals have used to their advantage.
“I hope people begin to see that bitcoin is a tool, and like any tool it’s sort of neutral in character,” Brito said. “It can be put to good uses; it could be put to bad uses.”
Another point of concern for the commissioners is the volatility in bitcoins’ value. One was worth about $14 at the beginning of this year, but exchange websites recently valued a bitcoin at more than $900.
Weintraub, the FEC chairwoman, offered a note of caution to groups thinking about accepting bitcoins.
“We’re not saying no; obviously, it’s up to you,” she said, “but we have seen committees burned when investing in volatile entities. We’ve seen it with campaigns that invest in the stock market, and the stocks went down, and all of sudden they didn’t have the resources that they thought they had.”
But Weintraub expects the technology, like others for donations, could catch on.
“We have not seen the last of bitcoins at the FEC,” she said.
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