Digital currencies flow into campaigns, but state rules vary
For congressional candidate Shrina Kurani, cryptocurrency is not only the future of money, it's a transformative technology that could revolutionize campaign funding and attract a new generation of voters.
She is among a vanguard of candidates courting campaign contributions in digital currencies such as Bitcoin.
“We are a campaign that is speaking to a large part of the population, especially younger people,” said the American-born daughter of Indian immigrants, who is on Tuesday's primary ballot as she seeks the Democratic nomination for a congressional seat east of Los Angeles.
Kurani's foray into digital currency to help fund her campaign would not be possible if she were running for the California Legislature or some other office within the state. While the federal government allows political donations in cryptocurrency, California does not, having banned the practice four years ago.
The difference underscores not just the rising popularity of cryptocurrencies but also how regulation varies widely across the U.S.
Some states, including Arkansas and North Carolina, also don't allow for cryptocurrency donations in state races under existing campaign finance laws. Others have followed federal rules for congressional candidates and allow donations with disclosure requirements and contribution caps, typically set at $100. Still other states, including Hawaii, Idaho and South Dakota, have adopted no specific policies around digital currency donations.
Digital currencies offer an alternative that does not depend on banks. Instead, transactions are validated and recorded on a decentralized digital ledger called the blockchain.
Perianne Boring, founder and CEO of the Chamber of Digital Commerce, a trade association representing the blockchain industry, likened the use of cryptocurrency in politics to former presidents Barack Obama using smartphone technology and Donald Trump leveraging social media.
“Blockchain technology can increase participation in the political process in a very positive way,” Boring said, noting that is particularly true for younger people and members of minority groups who might be skeptical of traditional monetary methods.
Critics say the potential downside is lack of transparency — not knowing who is ultimately behind the donation.
Beth Rotman, director of the Money in Politics and Ethics Program for the nonpartisan watchdog group Common Cause, worries that traceability is more difficult with cryptocurrency.
“In campaign finance, you want disclosure. You need backup information,” Rotman said. “I know (cryptocurrency) is sexy and signals to people that you're a hip new candidate, but there has to be a better way to do it than compromise the other parts of the campaign finance system.”
Timothy Massad, a former chairman of the U.S. Commodity Futures Trading Commission, also is concerned about disclosures.
“The danger is that this is still, in my mind, a sector where there is insufficient regulation, particularly on the risk of illicit activity and money laundering,” said Massad, currently a research fellow at Harvard University's Kennedy School of Government.
Cryptocurrency donations have been permitted in federal races for years, after the Federal Election Commission allowed their use in a 2014 opinion.
The commission said political committees should value digital currency contributions based on the market value at the time the donation is received. Candidates also must return contributions that come from prohibited sources or exceed contribution limits.
In the 2017-18 election cycle, cryptocurrency donations reported to the Federal Election Commission came to just over $1.2 million. They have hit about $500,000 so far in the current cycle, which has months to go before the general election.