Feds closer to approving bitcoin political donations

Fredreka Schouten | USA TODAY

WASHINGTON — Political campaigns soon could accept virtual money.

Lawyers for the Federal Election Commission this week recommended that the commission approve the use of bitcoins, a form of digital currency, as in-kind contributions to federal campaign committees. Commission members are scheduled to weigh the proposal Thursday.

However, political committees would not be allowed to spend the online money they receive or donate it to others, under the draft advisory opinion prepared by the agency's lawyers.

The action by federal election regulators responds to a request by the Conservative Action Fund PAC, a conservative political action committee started by Virginia campaign-finance lawyer Dan Backer and Shaun McCutcheon, a conservative Republican activist from Alabama.

Bitcoins and other online currencies allow users to transfer money from digital "wallets" without going through banks or other financial institutions. Government regulators and law-enforcement official are paying increasing attention to virtual currencies as potential havens for criminal activity and tax evasion.

The Senate Homeland Security Committee plans a Nov. 18 hearing on the topic.

In their opinion, the commission's lawyers said bitcoin contributions fall in the same category as in-kind donations of stocks or computer equipment and should be permitted.

The lawyers, however, stopped short of treating bitcoins as U.S. currency and recommended that the FEC deny the Conservative Action Fund's request to use virtual money to pay its vendors and donate to candidates. Instead, the committee would have to sell its bitcoins and deposit the money in a campaign account before passing the funds on to others.

Backer said he has not had a chance to examine the draft opinion but said he opposes the spending restriction. "The idea that we can't contribute to candidates (using bitcoins) is problematic."

Backer and McCutcheon are challenging other campaign-finance restrictions. McCutcheon brought a lawsuit before the Supreme Court that seeks to toss out a portion of federal law that caps at $123,200 the total amount that an individual can give to all federal candidates, parties and political action committees in a two-year election cycle.

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