After months of debate, the Federal Election Commission unanimously approved the use of bitcoins for political contributions. The decision also allows political committees to purchase digital currency as an investment.
The decision came in the form of guidance to the Make Your Laws PAC and is not considered an official rule or regulation. However, the decision paves the way to the use of bitcoins by any federal political committee. The FEC is the latest federal agency to issue guidelines on the digital currency. The IRS recently said it would tax bitcoin as property, not currency.
Announced last Thursday, the decision does have some restrictions. Most importantly, no anonymous contributions will be allowed and committees accepting the digital currency must scrutinize the donations for legality. Election committees must also sell their bitcoins and convert them into U.S. dollars before they are deposited into an official campaign account.
The FEC advisory opinion also said that committees accepting bitcoin must report their value based on the exchange rate the day the contribution is made.
Jim Harper, global policy counsel of the industry's Bitcoin Foundation, said the FEC's move lends further legitimacy to the computer-generated currency:
"It's another part of the growing body of regulation that establishes bitcoin as a co-equal part of the financial services system."
FEC commissioners disagree on the limit of the donations. One of the primary concerns of some committee members is the possibility of digital currency being used to conceal political donors. The need for transparency was a common concern among all commission members.
The Make Your Laws PAC pledged to record the name, address, occupation, and employer of all bitcoin contributors. Normally, those details are only required of donors who give $200 or more to federal campaigns.
Democratic members of the commission have said donations should not exceed the current limit of $100 on cash contributions. Republican Commission Chairman Lee Goodman disagreed, saying digital currency contributions should have higher limits. Currently, the law limits individual contributions to $2,600 to a candidate per election and $5,000 to a political action committee. Individuals and corporations can give unlimited sums to super PACs."To me, the opinion that the commission approved today supports the right of bitcoin users to contribute as they would all other things of value such as silver dollars and works of art. This advisory opinion in no way established the outer limit," Goodman said.
It seems that the lack of a clear limit has some political donors ready to test the committee's guidance. Conservative lawyer Dan Backer, who failed to persuade the FEC to accept bitcoin last year, is not waiting for the commission to set firm donation limits. Becker says he will start making donations larger than $100 to House and Senate candidates through BitPAC, a political action committee he founded.
Even before the commission announced its decision, the Libertarian Party began accepting bitcoin last year. According to Executive Director Wes Benedict, the party has collected $10,000 in bitcoin donations. Texas Republican Attorney General Greg Abbot announced last month he would accept digital currency for his gubernatorial campaign.
Another Texas Republican, Rep. Steve Stockman, accepted digital currency for his failed bid for the U.S. Senate. Colorado Democrat Jared Polis, a long time bitcoin supporter, announced immediately he would accept the digital currency.
Many political observers expect bitcoin donations to become common but slowly. Campaign committee officials working to elect House Democrats said they had no immediate plans to begin accepting bitcoin.
"You may not see a lot of establishment candidates in the parties" rushing to accept the currency just yet, noted Michael Toner, a Washington campaign-finance lawyer and a former FEC chairman.