The Bitcoin Foundation has sent a letter to the US Federal Election Commission, supporting calls for bitcoin campaign contributions to be officially allowed.
The letter broadly supports a letter issued by the Conservative Action Fund PAC (CAF) earlier this month. The foundation calls for bitcoin-based contributions to be allowed, and points to FinCEN’s 18th March guidance on virtual currencies as evidence that the government is already recognizing the currency as having an equivalent value in ‘real’ currency.
The foundation’s letter argues that Internet-based payments are already an accepted source of campaign contributions. Even SMS payments are currently permitted following a decision by the commission a year ago, the letter points out, arguing that methods have been devised to ensure that payments are not taken from unauthorized sources.
A screening technique proposed by CAF would require contributors paying via credit card to give their full name and address. The letter said:
“The collection of bitcoin contributions is no different in this regard than the collection of contributions online or by text message."
Bitcoin shouldn’t be automatically classified as an in-kind or mandatory payment, argues the letter, suggesting that it has characteristics of both. The Federal Election Campaign Act requires money to be deposited into a political action campaign’s bank account within ten days, whereas in-kind payments may be held in their current form for longer.
But there is a more significant reason underlying the foundation’s wish to have bitcoin donations to be permitted as in-kind payments, and that relates to the technological characteristics of the protocol. It can be used both as a currency, and as a record of ownership, said Marco Santori, the Bitcoin Foundation’s regulatory affairs committee chair.
“Colored coins are a good example of this. If CAF got a donation in the form of a bitcoin, that could be worth $120 on Mt. Gox, or it could be a colored coin that signifies the ownership of a thousand shares in a company, that could be worth thousands or millions,” he said. “We’re not seeing a lot of colored coin activity – there’s not a lot of smart property. But there are foundation members working now on enabling that technology.”
Some politicians are already accepting bitcoin contributions to their campaigns in what appears to be an ‘act first, and ask forgiveness later’ stance. Mark Warden, state representative for New Hampshire, did not respond to CoinDesk’s questions about the amount that he has raised in bitcoins since he began accepting them. Neither did the US Libertarian Party, which is also now accepting contributions this way.
One barrier to political contributions in bitcoin could be the lack of a recurring payment mechanism in the protocol. The Libertarian Party raises the issue on its website, and directs people to simply make manual payments as often as they wish.
Another issue will be the potential for anonymous use of bitcoin. The foundation highlights the network’s transparency, saying:
“The fact of, time of, and amount of each and every transaction from one public key to another occurring in the bitcoin network is automatically recorded in the public block chain, and this record is maintained indefinitely."
Santori added that IP addresses used to make bitcoin payments could be traced.
In truth, these things can easily be spoofed. Proxies can be used, and payments can be made anonymous using online bitcoin mixing services. This means, in theory, that an organization could exceed the current limits on contributions simply by making payments from a variety of suitably obfuscated addresses.
“The fact that bitcoin addresses can be manipulated isn’t really relevant,” protested a spokesperson for the foundation. “The FEC has permitted donation recipients to rely on the truthfulness of the information provided by other donors, and there is no reason for it not to do so for donors wishing to contribute in bitcoin.”
We can expect an advisory opinion by the Federal Election Commission on this issue by 28th October.