Bitcoin Penetrates the Presidential Campaign

Bitcoin continues to push deeper into the fabric of American society as it may now have an impact on who we elect as the President of the United States in 2016. Last week, Kentucky Senator Rand Paul became the first candidate to accept Bitcoin donations for his presidential campaign.

In May 2014, the Federal Election Commission (“FEC”) gave individuals the green light to make political campaign contributions via Bitcoin. Although some local politicians over the course of the past year have already dabbled in collecting donations with Bitcoin, Paul’s adoption of the popular digital currency into his campaign finance strategy propels Bitcoin onto the national stage. On Paul’s website, any individual—from anywhere in the country—can donate to “Stand with Rand” not just with a credit card or PayPal, but also Bitcoin.

Paul is reported to be using the popular Bitcoin payment service provider, BitPay, to facilitate the use of his Bitcoin donations. A payment service provider is commonly used by individuals and organizations to transact Bitcoin. But in Paul’s case, employing a reputable payment service provider is even more critical because while the FEC permits Bitcoin campaign donations, it does not permit Bitcoin currency to fund those campaigns directly, i.e., using Bitcoin to purchase goods or services directly. The FEC requires that all Bitcoin contributions be converted to U.S. dollars and deposited into a bank account before it can be used for campaign funds. BitPay performs the role of converting Paul’s Bitcoin donations into U.S. dollars so that it can then be used to fund his campaign.

The impact that Bitcoin will have on Paul’s campaign has still yet to be determined. If Paul begins to receive a substantial amount of donations through Bitcoin, some may question whether Paul’s Bitcoin contributions are in compliance with campaign finance laws. Keeping in line with what the FEC requested when it issued its guidance last May, Paul’s website caps each separate Bitcoin donation at $100. Theoretically, however, this would not prevent someone from anonymously making a large number of separate, $100 Bitcoin donations.

In addition, although Paul’s website warns that “Federal law requires us to use our best efforts” to collect personal information from its donors, Bitcoin, by its inherent nature, provides a level of anonymity that is difficult to track. Unlike credit cards and PayPal, a Bitcoin donation can come from anywhere in the world with little trace as to where it actually originated. Thus, while an individual may provide a seemingly valid U.S. address and contact information on Paul’s website, his or her Bitcoin donation may be coming from somewhere entirely different. The upshot is that Paul’s “best efforts” may not be enough to prevent contributors from falsifying their personal information in order to bypass the $100 cap and, thereby, violating campaign finance laws.

Paul’s announcement is significant for the Bitcoin industry. It will be interesting to follow whether Paul is successful in receiving a substantial amount of donations through Bitcoin, and whether other presidential candidates will jump on the Bitcoin bandwagon.