Government Technology: States Split on Cryptocurrency’s Place in Political Races

Raising funds for political campaigns has been a hallmark of American politics for quite some time, dating back to 1867. But a lot has changed since then, and digital currencies are raising new questions about the future of campaign funding.

According to the Federal Election Commission’s website, cryptocurrency donations have been allowed in federal elections since 2014. But, some state governments have not been as open to the idea, resulting in laws banning these types of contributions. …

The issue with this is that it makes crypto donations virtually untraceable, allowing those who contribute to campaigns to remain anonymous.

Another major concern is market volatility, as evident in the wild market fluctuations in recent months.

“The big thing with currency and crypto is just how incredibly volatile it is and how much its value can fluctuate,” said Stephen Spaulding, senior counsel for public policy and government affairs for nonpartisan watchdog group Common Cause. “If you take a step back and think about why we regulate the raising and spending of money to influence elections, ultimately, it’s to prohibit corruption and the appearance of corruption that can come with large contributions of cash or other things of value.”

Outside of that, Spaulding said, the lack of regulations surrounding these types of donations is also concerning.

“People are familiar with the two largest cryptocurrencies, Bitcoin and Ethereum,” he added. “But there are all sorts of cryptocurrencies that are coming on the market that are not entirely regulated, raising a lot of questions about whether campaign finance law, which is in place to curb corruption, can keep pace with changing cryptocurrency practices.”

As for transparency and traceability, he said the amount of money being contributed may not be as important as who is making a contribution.

“It’s not so much about the amount of money in politics; it’s where it comes from and what contributors want in return,” Spaulding added. “We’d love to encourage a system that relies on small-donor contributions because there’s less of a chance the contributions from many small-dollar donors will lead to corruption or the appearance of corruption, versus the system awash in large contributions.” …

As for whether these types of donations are the future of political campaign funding, however, the answer remains as varied as the states themselves.

“It’s an issue that is not going away, and it’s an issue that I think the FEC and Congress may need to continue to grapple with because I don’t think this is an issue that is going to disappear,” Spaulding said.