By Ben Goad - 09/12/13 09:53 AM EDT
The Federal Election Commission is weighing whether it should allow donors to contribute digital bitcoins to political campaigns. [WATCH VIDEO]
The commission has until Oct. 28 to issue an advisory opinion on the matter after a conservative political action fund sought permission to accept and spend the virtual currency.
Proponents of allowing bitcoin say they expect it be in wide use during the 2014 cycle and argue political campaigns should be able to tap into the currency’s growing popularity.
“We know people want to use this,” said attorney Dan Backer, who filed the FEC request on behalf of the Conservative Action Fund PAC. “If they want to use it, we want to let them. “
Approval from the FEC is no sure thing, as the currency has come under mounting scrutiny from federal regulators since its owners are anonymous, and there is no central managing authority.
Nonetheless, a handful of campaigns and political organizations have already begun to accept bitcoin donations, a scan of campaign websites reveals. The practice is particularly popular among Libertarians, who would prefer a reduced federal government role in the monetary system.
The Libertarian National Committee, for instance, is accepting donations in bitcoins, executive director Wes Benedict said Wednesday.
He pointed to the party’s official platform, which states, “Individuals engaged in voluntary exchange should be free to use as money any mutually agreeable commodity or item. ”
“We don’t favor one currency or form of payment over another,” Benedict said. “Many constituents asked us to offer the bitcoin option, so we made it available.”
He said the committee has received several thousands of dollars worth of the currency.
Libertarian Eric Olson, who ran an unsuccessful congressional campaign last year in North Dakota, sought bitcoin contributions, noting to potential donors that the currency “operates outside of the banking systems.”
State Rep. Mark Warden (R-N.H.) solicited bitcoins in his last campaign, as did Jeremy Hansen, an independent candidate who ran for the Vermont state Senate.
Backer said he expects the practice to become far more prevalent next year with as many as 20 percent of candidates for federal office joining the hunt for digital dollars.
He expressed confidence that the FEC would find bitcoin transactions acceptable. Federal campaign finance regulations have repeatedly been updated to allow for technological advances, such as donations made by automatic bank transfer, online credit card payment or even text message.
“The FEC has continually permitted the use of emerging electronic technology to make contributions,” argues the Conservative Action Fund, a “hybrid” shop that is allowed to contribute directly to federal candidates and, separately, raise unlimited amounts of money for independent expenditures.
The committee firmly believes bitcoins can be legally accepted but is seeking guidance for how they should be reported, Backer said.
It is unclear, he said, whether the bitcoin receipts should be considered money or “in-kind” goods donated to campaigns. Also in question is how to identify the worth of bitcoin contributions, since the currency’s value fluctuates.
“I don’t think it’s a controversial question. I think it’s a technical question,” he said. “How do we do this so we are complying with the law?”
Still, bitcoin has its share of critics, and regulators have signaled that additional oversight of the currency might be coming.
In the heavily scrutinized world of campaign spending, lawmakers who accept large bitcoin contributions may face questions about the source of the money, said James J. Angel, an associate professor of finance at Georgetown University’s McDonough School of Business.
“Is this a drug dealer who got the bitcoins off Silk Road?” Angel asked, referring to the website often described as an online black market. “The question is, where did the money come from?”
Beyond providing ammunition from a candidate’s political opponent, the volatility of bitcoin’s value could also bring unwanted risk to a campaign’s war chest.
Depending on the FEC’s final determination, candidates would likely want to exchange donated bitcoins for U.S. dollars “as fast as you bleeping can,” Angel said.