Should California politicians be allowed to accept donations of cryptocurrencies, such as Bitcoin?
The California Fair Political Practices Commission, the state’s election watchdog, is set to consider just that when it meets at 10 a.m. on Thursday.
Cryptocurrency is a virtual, encrypted currency, not backed by any governmental body. It is produced by computer servers completing complex math problems and which is shared and tracked using a technology called blockchain.
Bitcoin and Dogecoin are examples of two popular cryptocurrencies.
The commission’s current policy, which dates back to 2018, prohibits candidates from receiving any kind of donation in cryptocurrency format.
“In adopting the current regulation, the commission expressed concerns about the traceability of cryptocurrency and how, as a result, cryptocurrency might be utilized to circumvent contribution limits and prohibitions, or by foreign entities to contribute to campaigns,” according to a staff report prepared for the commission.
Though it’s considered a volatile investment, cryptocurrency has exploded in popularity. Ads for it aired during this year’s Super Bowl.
California lawmakers are considering bills that would make cryptocurrencies legal tender when paying for government services.
As of April 7, there were more than 18,750 cryptocurrencies available, according to the staff report; that’s compared to the approximately 2,200in September 2018, when the commission last considered the policy.
According to a Pew Research Center survey, 16% of Americans say that they have invested in or otherwise used cryptocurrency.
The Federal Election Commission, the FPPC’s federal counterpart, currently permits donations of Bitcoin valued at $100 or less, though it prohibits political committees from using Bitcoins to buy goods or services.
“Committees must sell the Bitcoins and deposit the proceeds into the campaign depository before using the funds to make disbursements for goods and services,” according to the FPPC staff report.
Nine states, including California, have outright bans against cryptocurrency contributions. Twelve states, plus Washington, D.C., allow them. Washington State, listed as an example in the staff report, limits cryptocurrency donations to $100 and treats them as the equivalent of cash; Washington requires that cryptocurrency donations be converted to legal tender and deposited into the campaign’s account within five business days.
Thursday’s FPPC agenda item regarding cryptocurrency is intended to be purely informational, and to provide the public with a chance to weigh in. The commission will not be taking any action on this topic Thursday.
However, the staff report does provide the commission with three options to consider.
The first is also the simplest: Continue prohibiting cryptocurrency donations.
The second option would put the FPPC in line with the federal policy, by limiting such donations to less than $100 per source and requiring that such contributions be converted to cash and deposited into the campaign bank account.
The third would treat cryptocurrency donations as in-kind, or non-monetary contributions. They would be subject to standard limits and the FPPC would maintain the requirement that the cryptocurrency be converted to cash.
Nate Persily, a Stanford professor and expert on campaign finance, said that he doesn’t see any issue with the FPPC allowing cryptocurrency donations.
“I don’t think that’s a problem. It’s just like anything else of value,” he said.
Persily likened it to someone donating a car or some other piece of property to a campaign, which is allowed.
“All of it needs to be disclosed and it has to be done within limits,” he said.
Persily said that concerns about the traceability of cryptocurrency are the valid, but that the same concerns apply to cash.
“Because of the volatility and the price of different crypto assets, it may be more difficult to assess whether the contribution is within the limits of California law, but that’s not a unique problem to this space,” he said.