Rand Paul Randal (Rand) Howard PaulSecond GOP senator to quarantine after exposure to coronavirus GOP senator to quarantine after coronavirus exposure The Hill's Morning Report - Sponsored by National Industries for the Blind - Trump seeks to flip 'Rage' narrative; Dems block COVID-19 bill MORE is the first presidential candidate to let donors contribute to his campaign using Bitcoin—but just barely.

If a donor uses a credit card or PayPal, they can give up to the maximum contribution limit of $2,700 per election cycle. But if they try to use Bitcoin to give the max, the Paul campaign website pops up a message that reads: “There is a problem with your donation. Bitcoin donations are limited to $100. If you would like to contribute more that $100, you may select Credit Card as your payment option.”

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This $100 limit comes from an advisory opinion issued by the Federal Election Commission (FEC) last year, and it puts Bitcoin at an obvious disadvantage.

With Bitcoin, for the first time, the medium is the message. Contributions made using Bitcoin implicitly communicate the donor’s support for the digital currency and emerging technology broadly. Given that venture capitalists have poured over half a billion dollars into Bitcoin startups, there would no doubt be strong interest in signaling support for the technology. Seriously contributing to a campaign using Bitcoin would accomplish that, but the $100 limit makes it impossible.

The limit also puts the Paul campaign at a disadvantage. Not only might the limit turn off the Silicon Valley types Paul is trying to court, but it also means the campaign can’t take full advantage of one of Bitcoin’s great features: its low cost. While PayPal charges 2-3 percent to process transactions, using Bitcoin can cost 1 percent or less.

And yet, the FEC’s advisory opinion is probably being read too strictly.

The opinion was requested by Make Your Laws, a PAC that sought to accept Bitcoin donations and to pay for goods and services with Bitcoins. That is to say, the PAC sought to have a Bitcoin wallet with which it would receive, hold, and spend Bitcoins. It sought to take custody of the gifted Bitcoins, much like a campaign might take custody of a contribution of common stock or fine art.

The FEC approved the PAC’s plan to accept Bitcoins and treat them as in-kind donations. Among other things, the PAC would have to make sure it valued contributions based on the market value of Bitcoins at the time the contribution is received. The Commission also adopted the $100 limit that was suggested by the PAC.

Not wanting to run afoul of the Commission, campaigns have been carefully following the advisory opinion, including the $100 limit. But they’re likely reading the opinion much too narrowly.

Most campaigns that accept donations using Bitcoin, including Paul’s, do nothing like the Make Your Laws PAC addressed in the FEC’s opinion. They do not have wallets in which they receive or hold Bitcoins, they never take custody of Bitcoins, nor do they have to worry about valuing contributions at prevailing exchanges rates. Instead they use payment processors like BitPay, which is used by the Paul campaign.

These payment intermediaries serve a function much like PayPal would for traditional payments. They provide a turnkey solution for the campaign to accept dollar donations—except via Bitcoin rather than credit cards. They do this without the campaign ever having to touch Bitcoin. That is, using a processor, campaigns can accept donations using Bitcoin, but without ever accepting the Bitcoins themselves, which is what the advisory opinion covered.

As far as the campaign is concerned, a donor simply provides their name and other identifying information, chooses the amount they wish to contribute (say $2,700), clicks to pay, and that same amount is deposited in dollars to its bank account. In between, the processor quoted the Bitcoin price of the dollar amount the donor chose to contribute, and it accepted Bitcoins from the donor. But again, the campaign only ever receives dollars.

The $100 limit is arbitrary even when a campaign actually accepts Bitcoins because campaigns have an obligation to disclose their donors regardless of how they contributed. But even taking the Bitcoin advisory opinion at face value, it should only be read to cover the actual acceptance and holding of Bitcoin.

While the FEC should clarify its opinion, campaigns should also consider whether they’re tying their own hands unnecessarily.

Brito is executive director of Coin Center, the leading non-profit research and advocacy group focused on the public policy issues facing cryptocurrency technologies such as Bitcoin. He also serves as adjunct professor of law at George Mason University.