The currency should be treated no differently than other money, the author writes. Let Bitcoins be used for donations

The federal government is on the verge of issuing a decision that could revolutionize the ways political campaigns are conducted and, in the long run, affect the spending practices of every consumer in America. The Federal Election Commission (FEC) has been asked to issue guidance to political campaigns on accepting contributions in the form of a new digital currency called Bitcoin.

It’s a great idea. Bitcoin political contributions will expand the number of Americans who can get involved in campaigns to support the candidates they want, how they want. It is the next logical iteration of democratization of the political process enabled by the Internet.


For those unfamiliar with this currency, Bitcoins can be bought with U.S. dollars and spent in exchange for goods or services sold by vendors who have chosen to accept Bitcoins. For example, you could buy a cupcake from San Francisco’s Cups and Cakes Bakery, which accepts Bitcoins, and the bakery’s owner can then use the Bitcoins it receives from your payment to make purchases from other vendors who accept Bitcoins. Bitcoin works by using a unique number stored online whose ownership can be transferred directly from one person’s virtual wallet to another’s using a computer or smartphone. To consumers, the benefit of Bitcoins is a currency not controlled by any one federal government or financial institution. It is, as one expert describes it, “a true, stateless, virtual currency” that “will change the way we think about stores of value, finance and the independence of the virtual economy.” Bitcoins have become so popular that today they account for $1 million of commerce in the United States every day. At present the total value of all Bitcoins in circulation is estimated at $1.6 billion.

As Bitcoin’s popularity continues to soar, political parties and candidates are beginning to accept and spend this new currency. The Libertarian Party now accepts Bitcoin contributions. Likewise, a recently re-elected New Hampshire State Representative, as well as candidates in North Dakota and Vermont, accepted Bitcoins in their recent campaigns.

The question before the FEC is how the very modern use of Bitcoins fits within the very antiquated laws that govern campaigns. Are Bitcoin contributions monetary contributions or in-kind contributions? Either would be permissible, but federal law regulates them differently. When a Bitcoin contribution is received, which set of rules applies? Who decides, and when do they make that decision?

The question is novel and difficult. On the one hand, Bitcoin is an electronic currency that can be used to directly purchase goods and services. Bitcoins are widely accepted as money, and can be easily exchanged for U.S. dollars. Recognizing these facts, at least one federal court has conclusively held that “Bitcoin is a currency or form of money.” On the other hand, because Bitcoins have fluctuating values and can be bought and sold, they are also intangible goods with their own value. Their value cannot be determined with certainty until they are exchanged for U.S. dollars on any one of various, separate 24-hour online exchanges. They are thus similar to a contribution of silver-dollar coins, which the FEC concluded could be treated by the recipient as either a monetary contribution or an in-kind contribution.

Allowing candidates and political action committees (PACs) who receive Bitcoin contributions to decide whether to treat them as monetary or in-kind contributions makes sense. If the recipient wants to treat Bitcoins as monetary contributions, it can convert them to U.S. dollars and deposit them in the bank within 10 days as required by federal law for monetary contributions. If, however, the recipient wants to treat Bitcoins as in-kind contributions, it can hold the Bitcoins for longer than 10 days and exchange them for U.S. dollars at a later time. PACs can already do the same thing with similar items like contributed stocks, bonds, and artwork. Or, they can hold them and use them to purchase goods and services – potentially enjoying the appreciation in Bitcoin value and Bitcoin-only discounts.

Other Bitcoin questions being considered by the FEC are even more difficult, especially those arising from the dramatic fluctuations in Bitcoins’ value. At the beginning of the year, one Bitcoin cost less than $15. Later, its cost rose to over $260. It’s now about $135. If Bitcoin contributions are monetary contributions, when should the value of the contribution in U.S. dollars be calculated for reporting purposes — upon receipt or subsequent sale — and how can they be kept in compliance with FEC contribution limits? Can a campaign or political organization pay directly for goods and services using Bitcoins? How do campaigns report the increase in value?

Though these are difficult questions, they are worth answering. Some express suspicion about Bitcoin contributions because they are not contributions in U.S. dollars. However, the FEC already allows Americans to make political contributions in foreign currencies. To be sure, we have an interest as a society in keeping foreign influence out of American elections, but the best way to protect that interest is to ensure that contributors are American citizens or permanent residents – not to limit how they can contribute.

Others are skeptical because the technology is new. However, the FEC has generally permitted the use of emerging electronic technology to make contributions. There was once a time when automatically transferring funds from a bank account, contributing online with a credit card, and using an electronic check were novel mechanisms for political contributions, but the FEC adapted as technology progressed and allowed each of those methods of making contributions. Recently, the FEC even allowed contributions via text messages.

Political advocacy is crucial to our democracy, and when the FEC makes its decisions about Bitcoin, it must remember this: Even if there is a purpose to the regulation of political advocacy, there is no purpose served by its overregulation. From Thomas Paine’s “Common Sense” to Ronald Reagan’s “A Time for Choosing,” political speech through books, pamphlets, mailings, commercials, blogs, Facebook, Twitter, and even Pinterest has always cost money, and as the Supreme Court has repeatedly held, such speech “is at the core of what the First Amendment is designed to protect.”

Throughout our great country, Americans of all political persuasions spend their time and money fighting for the causes their consciences call them to support. Bitcoins simply provide them with another means to do so, and in a manner of their choosing.

Dan Backer is the founder and principal attorney of DB Capitol Strategies PLLC, a campaign finance and election law firm that challenges unconstitutional restraints on political speech and association. Backer filed an advisory opinion request with the Federal Electoral Commission on whether Bitcoin could be accepted as campaign contributions.

This article tagged under: Opinion

Fundraising

Donations

Bitcoin