The Federal Election Commission’s draft plan to approve the virtual currency known as bitcoins for campaign contributions may prove either a windfall or a losing gamble for politicians keen on testing new ways to raise money.
Bitcoin advocates cheered an FEC draft advisory opinion released last week that, if approved, would allow campaign committees to accept bitcoins as in-kind contributions. Bitcoins are a digital form of “electronic cash” created in 2008 that enable online peer-to-peer payments without the use of a bank or intermediary authority.
“It is a stamp of legitimization for Bitcoin,” said Jacob Farber, senior counsel at Perkins Coie, which submitted comments to the FEC on behalf of the Bitcoin Foundation. A trade group representing the Bitcoin industry, the foundation weighed in on an advisory opinion request originally submitted in September by a political action committee known as the Conservative Action Fund.
If the FEC approves its draft opinion — the agency will take public comments until Nov. 13 — virtual currency advocates will win notice from an influential audience, namely lawmakers with potential jurisdiction over Bitcoin regulations. Sen. Thomas R. Carper, D-Del., has already signaled that his Homeland Security and Governmental Affairs Committee will discuss the FEC action it its next hearing.
Though bitcoins have been growing in popularity among political players, particularly libertarians, the currency still occupies only a tiny fraction of the marketplace at large. The current value of a bitcoin has reached $345 and GOP lawyer Dan Backer, who is representing the Conservative Action Fund, told the FEC that all bitcoins in circulation now exceed $1.3 billion in total value.
“One of the things that people hope with Bitcoin is that it does appreciate in value,” said Farber. “So that by giving a contribution in bitcoin, you have contributed an appreciating asset.”
But bitcoins have also been implicated in Ponzi schemes and money laundering, and the Securities and Exchange Commission has warned investors to beware of virtual currency scams. The value of bitcoins has fluctuated wildly even in the past year, and some technology analysts have warned of a looming “Bitcoin bubble.”
Backer is still reserving judgment on the FEC’s draft advisory opinion, which does not grant the Conservative Action Fund’s request for permission to both receive and donate bitcoins directly. The FEC opinion would permit political committees to accept bitcoins as in-kind donations, not unlike stocks or commodities. But a political committee wanting to make a bitcoin payment or contribute to another committee would have to first sell the virtual currency and convert it to U.S. dollars.
“An individual may contribute bitcoins to a campaign or a PAC, but a PAC cannot contribute bitcoins to a campaign,” said Backer. “Because it is a thing, it has value. We report the value as an in-kind contribution.” The FEC’s disparate treatment of how committees receive and distribute bitcoins “strikes me as odd,” Backer added, “and I really want to spend some time looking at this.”