The industry isn’t in the best shape right now, but the topic of donating to businesses in cryptocurrency remains a relatively safe space for innovation.
On January 25, the Election Commission introduced a bill in the Kansas House of Representatives to limit political donations via cryptocurrency to $100. Regardless of the success of this legislative initiative, Kansas will not be the first jurisdiction to focus on anonymous donations. From autocratic countries like Russia or China to electoral democracies like Ireland or Canada, you can find recent attempts to ban crypto donations to politicians around the world.
Opponents of cryptocurrencies may have a strong point – it’s hard to imagine a healthy democracy where large amounts of untraceable money flows between candidates. But the problem of “dark money” and the tools for its distribution in the political system existed long before the emergence of crypto-assets with fake names. The industry isn’t in the best shape right now, but the topic of donating to businesses in cryptocurrency remains a relatively safe space for innovation. Could this change in the next election cycle?
2014 rule and the $6,600 limit
The United States Federal Election Commission (FEC), an independent agency responsible for enforcing election law, first approached the topic of cryptocurrency donations in 2014. Digital assets weren’t such a big problem then, and the price of one Bitcoin
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hover around the $300 mark. Perhaps that’s why the FEC treated the new issue with indifference. It recognized the possibility of donating Bitcoin (and only in Bitcoin), but classified it as an “in-kind contribution” along with non-monetary promotional activities such as providing a free consultation or concert performance.
Despite the obvious inclusions, Bitcoin donations are considered anonymous and limited to the same token as direct cash donations. There is a basic cap on such donations, which increases with inflation from one election cycle to the next — as of 2024, it’s $3,300 in the primary and the same in the general election. The “contribution-type” status prevented activists from directly spending the received bitcoins – they had to “liquidate” them and deposit the money into their accounts.
But there is a caveat to the American political system. While personal donation amounts may be limited, you can always support political action committees (PACs) by donating up to $41,300 per year. There are also Super PACs with no limits. Technically, Super PACS can’t make any direct donations, but can spend an unlimited amount of marketing support on its candidates regardless of their campaigns.
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There is at least one successful case – BitPAC – specifically dedicated to promoting cryptocurrency and blockchain technology. He accepted donations in the form of Bitcoin, Ether
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And these donations were used to support US presidential candidates, congressional candidates, super PACs and grassroots organizations.
The FEC hasn’t made any significant announcements about cryptocurrency donations since 2014, even though Bitcoin’s total capitalization has skyrocketed since then, not to mention the issuance and adoption of hundreds of other digital currencies.
There is also a major exception for non-fungible tokens (NFTs). In 2022, the FEC deemed it “acceptable” to send NFTs to political campaigners without violating corporate contributions. Earlier in 2019, the FEC approved an ERC-20 token issued by Omar Reyes for use in an incentive program for his congressional campaign. The agency determined that these chips were worthless souvenirs.
Kansas or California?
Over the past decade, individual states have largely agreed with the FEC’s vague recommendations on cryptocurrency donations. Only in South Carolina, North Carolina, and Kansas did lawmakers strongly oppose any crypto donations. In the beginning, cryptocurrency donations spread slowly with the support of enthusiastic politicians like Rand Paul, Austin Peterson and Jared Polis.
However, in the 2020s, when every fifth American dealt with crypto to some extent and the industry itself became a problem for global regulators, the mood changed direction. In April 2022, Ireland became the first European country to officially ban political donations in crypto. As Irish Minister for Housing, Local Government and Heritage Darragh O’Brien explained to journalists at the time, the law was intended to protect Ireland.