Digital currencies are pouring into political campaigns, but state regulations vary widely
For congressional candidate Shrina Kurani, cryptocurrency isn’t just the future of money, it’s a transformative technology that could revolutionize campaign finance and appeal to a new generation of voters.
She is part of a vanguard of candidates courting campaign contributions in digital currencies such as Bitcoin.
“We are a campaign that speaks to a large segment of the population, especially young people,” said the daughter of American-Indian immigrant, who is taking part in Tuesday’s primary poll as she seeks the Democratic nomination for a congressional seat east of Los Angeles.
Kurani’s foray into digital currency to help fund her campaign wouldn’t be possible if she ran for the California Legislature or another state office. While the federal government allows political donations in cryptocurrency, California does not, having banned the practice four years ago.
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The difference not only underscores the growing popularity of cryptocurrencies, but also how regulations vary widely across the United States.
Some states, including Arkansas and North Carolina, also do not allow cryptocurrency donations in state races under existing campaign finance laws. Others have followed federal rules for congressional candidates and allow donations with disclosure requirements and contribution limits, typically set at $100. Still other states, including Hawaii, Idaho, and South Dakota, have no specific policies regarding digital currency donations.
Digital currencies offer an alternative that does not rely on banks. Instead, transactions are validated and recorded on a decentralized digital ledger called blockchain.
Perianne Boring, founder and CEO of the Chamber of Digital Commerce, a trade association representing the blockchain industry, compared the use of cryptocurrency in politics to former Presidents Barack Obama using smartphone technology and Donald Trump pulling part of social media.
“Blockchain technology can increase participation in the political process in very positive ways,” Boring said, noting that this is especially true for young people and members of minority groups who might be skeptical of traditional monetary methods.
Critics say the potential downside is the lack of transparency – not knowing who is ultimately behind the donation.
Beth Rotman, director of the Money in Politics and Ethics program for the nonpartisan watchdog group Common Cause, worries that traceability is more difficult with cryptocurrency.
“In campaign finance, you want disclosure. You need backup information,” Rotman said. “I know (cryptocurrency) is sexy and signals to people that you’re a hot new candidate, but there has to be a better way to do that than to compromise other parts of the campaign finance system.”
Timothy Massad, former chairman of the US Commodity Futures Trading Commission, is also concerned about the disclosures.
“The danger is that this is still, in my opinion, an area where there is a lack of regulation, particularly on the risk of illicit activities and money laundering,” said Massad, currently a researcher at the Kennedy School of Government at Harvard University.
Cryptocurrency donations have been allowed in federal races for years, after the Federal Election Commission authorized their use in a 2014 advisory.
The commission said political committees should assess digital currency contributions based on market value at the time the donation is received. Applicants must also return contributions from prohibited sources or in excess of contribution limits.
During the 2017-2018 election cycle, cryptocurrency donations reported to the Federal Election Commission amounted to just over $1.2 million. They’ve reached around $500,000 so far in the current cycle, which has months before the general election.
Shortly after the Federal Election Commission authorized cryptocurrency donations, then-U.S. Representative Jared Polis, a Democrat, began soliciting them. Now governor of Colorado, Polis is seeking similar contributions as he runs for re-election, with cryptocurrency donations capped at $100.
“Through campaigns accepting cryptocurrency donations, we can show the safety, accessibility, and desirability of using crypto in different types of transactions and also help send the message that Colorado is a hotbed of innovation,” said Amber Miller, Polis campaign spokeswoman.
As the popularity of digital currencies increases, some states that prohibit contributions to cryptocurrencies are reassessing.
Jay Wierenga, spokesman for the California Fair Political Practices Commission, said the agency would review its ban later this year.
“The commission always seeks to keep up with and stay ahead of the changing universe around political activity,” Wierenga said.
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Oregon is one of the most innovative states when it comes to elections, having been the first to institute mail-in voting. But in 2019, Oregon banned candidates campaigning for office in the state from accepting cryptocurrency donations. This was despite former Secretary of State Dennis Richardson, a Republican, saying they should be seen as “a new and innovative way to broaden participation.”
Two months after Richardson died of cancer in 2019, the Oregon legislature closed the door on such donations. As the Senate prepared to vote, Senator Jeff Golden, a Democrat, said, “One of the widely shared goals of this legislative session is to increase the transparency of money in politics, and cryptocurrency tends to go in the opposite direction”.
This feeling is not unanimous. One of the few state lawmakers who opposed the ban on cryptocurrency donations was Republican Representative Bill Post. He said a lot of people in the Legislative Assembly just don’t understand him.
“I don’t want (us) to look like a bunch of old fuddy-duddies here,” he said. “Let’s catch up with the 21st century.
Jesse Grushack, 30, is one of those voters fond of cryptocurrencies and who supports their use for political contributions. The New Yorker donated to the campaign of Democrat Matt West, another cryptocurrency enthusiast who was unsuccessful this year for a congressional seat from Oregon.
“At this point in American politics, anyone who is pro-crypto is someone I want to support,” Grushack said.
Kurani, 29, said his embrace of cryptocurrency is more than just a chance to flaunt his tech credentials. It is also a way to reach those for whom digital alternatives to US dollars are becoming their preferred legal tender.
She downplays concerns about donor secrecy, saying her campaign converts crypto donations into dollars and seeks the same information — name, address, employer, occupation — as for any donor.
“We really care about being able to represent Americans participating with new types of digital currency,” she said.
Camille Fassett, data reporter at Associated Press, in Oakland, Calif., and Audrey McAvoy, AP writer, in Honolulu; Stephen Groves in Sioux Falls, South Dakota; and Keith Ridler in Boise, Idaho, contributed to this report.
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