On Jan. 25, the Committee on Elections introduced a bill to the Kansas House of Representatives aimed at capping political donations via crypto at $10
On Jan. 25, the Committee on Elections introduced a bill to the Kansas House of Representatives aimed at capping political donations via crypto at $100. Regardless of the success of this legislative initiative, the state of Kanzas won’t be the first jurisdiction to target anonymous donations. From authoritarian nations like Russia or China to electoral democracies like Ireland or Canada, one can find recent attempts to ban crypto donations to politicians all around the globe.
The opponents of crypto may have a strong point — it’s hard to imagine a healthy democracy where large sums of untraceable money are flowing between candidates. But the problem of “dark money” and tools to dispense it around the political system existed way before pseudonymous crypto assets arrived. The industry isn’t having the best of its moments now, but the topic of campaign donations in crypto remains a relatively safe space for innovation. Could it change by the next electoral cycle?
The 2014 rule and a $6,600 cap
The first time the United States Federal Election Commission (FEC), the independent authority responsible for enforcing election law, approached the topic of crypto donations was in 2014. Back then, digital assets weren’t nearly as big of an issue, and the price of one Bitcoin (BTC) lay around the $300 mark. Perhaps that is why the FEC took the new problem light-heartedly. It acknowledged the option to donate in Bitcoin (and Bitcoin only) but qualified it under the category of “in-kind contributions” along with such non-monetary campaign activities as giving a free consultation or a concert performance.
Despite the apparent inclusion, Bitcoin donations have been deemed to remain non-anonymous and capped at the same mark as direct cash donations. There is a basic limit of such donations that grows along with the inflation from one electoral cycle to another — by 2024, it will stand at $3,300 for the primary and the same amount for the general election. The status of “in-kind contribution” also prevented campaigners from spending received Bitcoin directly — they have to “liquidate” it and then deposit the money into their accounts.
But there is a caveat within the American political system. While the amount of personal donations may be limited, one can always support Political Action Committees (PACs) by donating up to $41,300 yearly. There are also Super PACs, which have no limit whatsoever. Technically, Super PACS cannot make any direct contributions, but they can spend unlimited amounts of funds in marketing support of their candidates independent of their campaigns.
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There is at least one successful instance — BitPAC — specifically dedicated to promoting cryptocurrency and blockchain technology. It has accepted donations of Bitcoin, Ether (ETH) and Litecoin (LTC) and used those donations to support U.S. presidential candidates, congressional candidates, Super PACs and grassroots organizations.
The FEC has not issued any major statements on crypto donations since 2014, although Bitcoin’s total capitalization has sky-rocketed since then, not to mention the issuance and adoption of hundreds of other digital currencies.
There is also a major exception for nonfungible tokens (NFTs). In 2022, the FEC deemed it “permissible” to send NFTs to political campaign contributors without violating rules on corporate contributions. Earlier in 2019, the FEC approved an ERC-20 token issued by Omar Reyes to use in an incentives program for his congressional campaign. The agency decided the tokens to be souvenirs with no monetary value.
Kansas or California?
Over the last decade, the separate states have largely agreed with the FEC’s vague recommendations on crypto donations. It was only South Carolina, North Carolina and Kansas where lawmakers decided firmly against any donations in crypto. Early on, crypto donations started to spread slowly with the help of enthusiastic politicians like Rand Paul, Austin Petersen or Jared Polis.
However, in the 2020s, when every fifth American has dealt with crypto to some degree, and the industry itself became a sort of a problem for global regulators, the mood swung in another direction. In April 2022, Ireland became the first European country to officially prohibit political donations in crypto. As Darragh O’Brien, the Irish minister for Housing, Local Government and Heritage, explained to journalists back then, the law aimed to protect Ireland’s democratic system, “given the escalating threat of cyber warfare targeting free countries.”
This year, Kansas started to discuss political donations in the state legislature. The local House bill no. 2167 sets a cap of $100 for any political candidate in the state’s primary or general election. Moreover, even for donations under $100, the receiver…
cointelegraph.com