The Federal Election Commission has unanimously ruled to permit the use of bitcoins for political contributions, a move that lends legitimacy to the virtual currency but leaves unclear how valuable or useful bitcoins will prove to be in elections.
The commission approved bitcoin campaign contributions 6-0 Thursday in response to an advisory opinion request from the Make Your Laws PAC , which promotes direct citizen participation in the legislative process. The FEC had deadlocked on a previous, similar request submitted last year. Make Your Laws had asked the FEC for permission to collect bitcoin contributions no larger than $100 per election, per donor. It was not immediately clear whether, in giving the Make Your Laws PAC the green light, the FEC was approving only bitcoin donations capped at $100, or whether larger virtual contributions would be permitted.
The FEC also approved the PAC’s request to purchase bitcoins, but only if it sells the virtual currency and converts it into dollars before depositing and spending it. The FEC also stressed the PAC’s obligation to ensure safeguards to obtain and report the identities of its donors, given the anonymous nature of bitcoin transactions.
Bitcoins have grown increasingly popular with political committees and candidates, most notably libertarians, who have forged ahead in collecting them even in the absence of approval or guidance from the FEC. Candidates and committees collecting bitcoins include Rep. Steve Stockman, R-Texas, who lost his primary challenge to Sen. John Cornyn in March, and the Livingston County Libertarians in Michigan.
A campaign that collects bitcoins that then increase in value would enjoy a windfall, but the currency comes with risks as well. Created in 2009, bitcoins are privately issued outside the normal banking system and are transferred digitally among participating investors and merchants. In a recent Investor Alert , the Securities and Exchange Commission cites the risk of Ponzi schemes, unlicensed sellers and unsubstantiated promises of high returns in bitcoin transactions.