Crypto political donations barred
Ethics panel rejects use of virtual money over concerns it hides a donor’s identity.
SACRAMENTO — California’s campaign finance watchdog agency voted Thursday to prohibit the use of cryptocurrency including bitcoin for political contributions in the state amid concerns that the anonymity it provides would make it difficult to identify who is trying to influence elections.
The state Fair Political Practices Commission voted 3 to 1 against allowing use of the virtual currency, which is traded on the internet and not issued by a governmental entity.
The issue has drawn national attention. States that have allowed some use of cryptocurrency as campaign contributions include Colorado, Montana, Oregon and Tennessee, while the digital currency has been prohibited from political donors in Kansas, South Carolina and North Carolina.
FPPC Commissioner Frank Cardenas said cryptocurrency “is completely untraceable with respect to the identity of the individual.” He added that voter confidence in elections is already “waning,” so the panel should protect the integrity of the campaign finance rules.
Commissioner Brian Hatch also said allowing cryptocurrency would hinder the ability of the FPPC’s investigators to enforce laws against political money laundering involving campaign contributors.
“How do we know that they are not just a straw man for some oligarch or some foreign government?” Hatch asked. “This is a system that is designed to hide the source of the money, so why would we get into this?”
Commissioner Allison Hayward supported treating cryptocurrency the same as cash, but with requirements that candidates disclose donor identities. But FPPC staff attorneys issued warnings, noting that, unlike cash, there are no central bank records of transactions involving cryptocurrency.
Open-government groups including California Common Cause opposed allowing cryptocurrency in political campaigns.
Any change to state campaign finance rules regarding cryptocurrency should be rejected “at least until the risks of this emerging technology are better studied and understood, and appropriate regulatory guardrails can be put in place,” said Nicolas Heidorn, Common Cause’s policy and legal director.
He told the panel that allowing cryptocurrency donations may “hamper the commission’s ability to trace donor funds and ensure state campaign finance laws are respected.”
Anonymity and lack of central oversight are key features of cryptocurrency and could hinder control by the FPPC, warned Austin Graham, an attorney for the nonpartisan nonprofit Campaign Legal Center.
Allowing the use of cryptocurrency in campaigns is supported by the Blockchain Advocacy Coalition, which represents dozens of business owners, investors and innovators in the blockchain and cryptocurrency industry, said Ally Medina, executive director of the group.
“The transfer of cryptocurrency creates an immutable record, and this technology offers the public benefits in terms of transparency of political contributions,” Medina said in a letter to the panel.