Amidst the backdrop of a chaotic presidential election between Democrat Hillary Clinton and Republican Donald Trump, the US Federal Election Commission is quietly debating whether to reclassify how it treats bitcoin donations.
In May 2014, the FEC greenlit bitcoin donations to political campaigns, classifying them as an “in-kind” contribution in response to a request by a Make Your Laws PAC, a North Carolina organization. At the time, the agency put a cap of $100 per contributor, an amount that corresponds to whatever the current market price is at the time of the donation.
By ruling that bitcoin donations are in-kind contributions, the FEC placed the digital currency in the same category of stocks or other kinds of valuable assets. This was largely driven by the fact that bitcoins can’t be deposited into a bank account. Instead, a campaign can hold on to any bitcoins received until it decide to sell them, at which time a 10-day deadline for depositing the funds kicks in.
Public records, however, show that the FEC is rethinking this approach, at least in part.
According to a draft agenda from 15th September, the FEC is in the earliest stages of considering whether to continue that “in-kind” classification or align the digital currency with its rules on cash.
The agency wrote:
The process was approved by the agency late last month. Once the planned rulemaking is outlined and published in the Federal Register, the FEC will open the floor to public comment. The agency said it was particularly interested in comment from those who operate payment platforms and wallet services.
The fact that in-kind contributions can’t be deposited by campaigns into their official bank accounts could lead the agency to stick with the current rules. Still, the FEC is seeking comment on how any new rules might conflict with stipulations in the Federal Election Campaign Act of 1971 regarding deposit requirements for donations.
The discussions at the FEC aren’t happening in a vacuum, however.
The potential change comes amid a broader conversation within the FEC about how to oversee elections in an era of digitization, which could also result in modernized requirements for electronic recordkeeping.
According to the agenda document, the FEC wants to update how it classifies electronic donations as a whole. It cites one study that showed roughly half of all campaign contributions during the 2012 election were sent either online or by way of email.
As a result, the rulemaking process will also encompass other electronic means of payment like prepaid cards and platforms like PayPal. At issue, the FEC said, is that the laws it is required to enforce “largely predate this technological evolution, as do many of the Commission's regulations”.
The agency continued:
A representative for the FEC declined to comment when reached.
Given that the FEC has only just begun its potential rule-changing process, it’s too early to say in which direction it might ultimately lean.
To get there, the FEC is looking to draw comments from the public, including stakeholders in the digital payments space that might ultimately be impacted by any new rule it creates.
The agency said:
Coin Center, a public policy and research outfit in DC, said it plans to submit comment. Executive director Jerry Brito told CoinDesk that “we think it's great that the FEC is looking to modernize its rules”.
The organization has pushed in the past for the FEC to rework its rules on bitcoin donations, criticizing the $100 cap.
Yet even if the FEC does start classifying a bitcoin contribution as a kind of cash donation, it wouldn’t necessarily lift the $100 limit. As it stands, donors can only give up to $100 in currency to a campaign, an amount that drops to $50 if the contribution is given anonymously.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.