How will bitcoin impact America’s campaign finance system? Corruption, anonymous donations and foreign contributions stand out as some of the currency’s biggest risks. Currently, these issues are being debated by policymakers at the Federal Election Commission (FEC).
A large portion of last week’s FEC open meeting was taken up with a discussion about the Conservative Action Fund’s (CAF) desire to start accepting bitcoins, something that chairwoman Ellen L Weintraub called “a seemingly exotic and novel issue”.
As a result, four advisory drafts were presented in a hearing last week by the FEC. One draft proposed that advisory opinion should be voted on.
Let’s take a look at some of the interesting discussions these policymakers had regarding bitcoin.
Bitcoin isn’t money
The question at hand is not really whether political groups can accept bitcoin. In reality, there are other units of value that groups already accept as in-kind donations; bitcoin should have a place not as money, but as a tradable instrument. It’s clear the FEC is making the assertion that, in its view, bitcoin is not money but a “thing of value” such as stock or a treasury bond. Lee Goodman, the vice chairman of the FEC said:
“The CAF does not need our permission to accept in-kind contribution of things of value, including bitcoins.”
He continued: “I think the legal question for the FEC is quite vanilla. The legal analysis starts with the clear and unambiguous statutory right that Mr Backer’s client has to give and receive contributions. There’s no debate about that. Contributions are defined as anything of value.”
“Bitcoins clearly are things of value to many people. They have purchasing value, they have trading value. They have US dollar exchange value. That makes bitcoins, in my mind, no different from any other in-kind contribution that political committees can give or receive today.”
He added: “There are any number of things of value that are like these bitcoins, and we have quite easily adapted our regulatory regime to regulate them. Many treasury bonds now are nothing more than an electronic transfer with an account number on them.”
Anonymity
However, as a result of this, CAF may not use bitcoins for disbursements (bitcoin being a thing of value and not cash money). Instead, CAF must sell its bitcoins and deposit the proceeds in a registered bank account in order to use them. That distinction is important, since the FEC is very concerned about anonymous political donations.
“Bitcoins are zipped electronically over the internet, from one bitcoin wallet to another bitcoin wallet. And There is concern that somehow that gives rise to potential anonymity and false reporting of the donor,” said Goodman.
It’s clear that the FEC’s job is to make sure that it can keep track of political donations, a serious concern for them regarding the usage of bitcoin.
“Congress, when it enacted the FEC, put in very low limits on donations that come in anonymously and donations that come in as cash. [Bitcoin] seems to share some of those features,” Weintraub commented.
According to commission member Matthew Petersen, the question of anonymity still remains an issue once a political group has received bitcoin. He noted that all four draft opinions on the subject deem the acceptance of BTC as fine, but the disbursement was another issue altogether. He said:
“All the drafts would allow the CAF to receive bitcoins as in-kind contributions, and then [the] question was, what could they do with them at that point?”
What happens next?
In the end, a motion to vote on one of the advisory opinions, Agenda Document No. 13-45-B (Draft D), failed to pass, with the votes split 3-3.
The cause can be attributed to some of the FEC’s leaders, who highlighed the need for more time and information during the hearing. Each member discussed the amount of consideration virtual currencies such as bitcoin take to fully understand, given the precarious circumstances of something like campaign finance law.
It’s possible that the FEC could reach some kind of temporary consensus before the end of the year. One proposed solution was to draft an advisory opinion that everyone could agree on, then allow it to expire at some point in the near future. One of the issues is that bitcoin’s status as a ‘thing of value’ could be problematic given “potential problems because of the volatility”, according to FEC member Caroline Hunter.
Weintraub, the chairwoman, suggested at the hearing that the FEC could “try and craft an interim policy” by the end of the year. Ultimately, the major concern now is that rules are put in place for the anonymity issues that surround bitcoin.
“We have a statue that requires transparency,” she said.