Political campaigns

How to Donate Crypto to Political Campaigns – Forbes Advisor

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

Interest in cryptocurrency is growing exponentially – and the 2022 midterms could be when congressional activists jump on the bandwagon.

Since the 2020 presidential election, there has been a noticeable increase in US political campaigns accepting donations via cryptocurrency. Younger, more dynamic candidates started the trend – Andrew Yang was an early enthusiast – but in mid-2021 the National Republican Congressional Committee (NRCC) said it would start accepting donations in crypto, marking a major turning point for cryptocurrency in US politics.

The rules for political campaigns accepting crypto donations are murky and may vary from state to state. But with players like the NRCC entering the game, perceptions are definitely changing.

Before you jump at the chance to hand out Dogecoins to your favorite congressional candidate, you should know the rules and limits, as they are, that apply to crypto donations and political campaigns.

Why do political campaigns accept crypto?

NRCC Chairman Tom Emmer said the committee started accepting crypto because people expressed interest in donating it. Others suggest that crypto enters the sphere of political campaigning as a political statement, rather than a campaign convenience.

The NRCC is the first major party committee to accept cryptocurrency donations. Individual lawmakers have also accepted crypto as donations, including Senator Ron Wyden (D-OR) and California congressional candidate Aarika Rhodes. According to The Washington Post, Rhodes raised over $30,000 in crypto.

But the operation of actually donating crypto to political campaigns is tricky and can limit its value as a useful source of campaign contributions.

Transparent political contributions are mandated by law, with identifying information tracked for each donation so it can be tracked in the system. The Federal Election Commission (FEC) has strict rules in place to prevent crypto from circumventing its existing system for monitoring political contributions.

In 2014, the FEC issued a notice that Political Action Committees (PACs) can accept contributions made in Bitcoin, but imposed strict reporting guidelines. PACs must keep detailed receipts from Bitcoin contributors, including their name, address, employer, and occupation.

Applicants are also required to exchange the crypto for dollars, which involves more paperwork, fees, and time before they can implement the crypto contributions.

Some candidates accept these obstacles anyway to woo voters.

“By accepting crypto as a form of campaign donations, candidates are able to signal to voters that they understand technology, welcome innovation, and want to engage with a younger demographic,” says Ben Weiss, CEO and co-founder of CoinFlip, the world’s largest Bitcoin ATM network.

Crypto Insiders Prefer Cash Donations

More candidates are accepting crypto now that cryptocurrency is starting to be more regulated in Washington D.C. Industry insiders are disbursing millions in cash donations, ironically enough, to promote candidates favorable to the industry of crypto, according to the Washington Post.

In early March, President Joe Biden signed an executive order directing branches of the federal government to review the risks and benefits of cryptocurrencies. The order cites the market’s $3 trillion market capitalization in November 2021 as the tipping point pushing the government to act on digital assets.

Industry experts hope to get closer to lawmakers as the regulatory process unfolds. But due to the challenges surrounding crypto imposed by the FEC, much of what has been given to lawmakers in the past by cryptocurrency insiders isn’t even in actual cryptocurrency.

Only $580,000 of cryptocurrency has been donated to political committees by crypto insiders in the current cycle. The rest of the $7.3 million donated was in cash, according to a Bloomberg analysis.

3 things to watch out for if you’re making crypto donations

There is no doubt that the adoption of crypto by the American political class is another sign of the growing legitimacy of virtual currency.

“The use of crypto for political campaigning is further evidence that it is starting to be used more and more as a utility in everyday life,” says Weiss.

If you are considering making crypto donations for a political campaign, you should be aware of the following caveats:

1. Cryptocurrency is highly volatile

Crypto donations are treated as in-kind contributions, meaning the value is recorded when the donations are received.

Campaigns need to convert crypto into cash before spending it – and with its volatility and the time it takes to liquidate it, some of your contribution could be lost along the way.

Ron Watkins, a Republican House candidate in Arizona, reported that he lost 27% ($342) of his two bitcoin contributions that originally totaled $1,255, according to the Daily Beast.

2. Accepting is expensive for candidates

Since candidates must convert Bitcoin to cash before they can spend it, using it costs them money. Many crypto platforms have processing fees for these types of transactions, which means that your full donation will not go directly to the candidate.

3. Your donation will not be anonymous

If you love crypto because of its anonymity factor, don’t consider donating it to a political campaign. FEC rules require campaigns to report the name, address, and employer of anyone who donates cryptocurrency.

Many crypto wallets, including BitPay and Coinbase Wallet, create new wallet addresses for each transaction, which helps hide the origin of donations. Buzzfeed News points out that this fact could cause problems in complying with campaign finance laws.

Make sure your donations are properly recorded. Only $50 in cash can be donated anonymously.