Critics Say Political Crypto Fund Donations Are Not Ideal Due To Not Being Very Practical
Critics Say Political Crypto Donations Are Not Practical
Democratic presidential candidate Eric Swalwell withdrew his candidature from the 2020 Presidential run. However, that was not a cause of big surprise or something that would have made it to the headlines, the main reason for so much hype around Swalwell's withdrawal is mainly because he was one of the two Democratic candidates who were accepting crypto donations. With his departure from the Presidential race, Andrew Yang remains the only one who has been openly propagating about the advantages of cryptocurrencies and also accepts them as political donations.
Although cryptocurrency proponents have been calling it revolutionary, critics and political analysts beg to differ otherwise. They say, the move by the two Democratic candidates to accept crypto as political funds, is just a political gimmick to appeal to the Gen-Z and tech enthusiasts. It does not make much of a difference in the overall political scenario. Almost every other politician has been following the traditional method for accepting political donations, and they seem to be doing just fine.
The critics say no matter by which medium the funds are being transferred, all of them have to go through a rigorous tight regulation from the SEC. For the 2020 presidential campaign, anyone can donate a maximum of $2800 and the campaigns must know the source of the fund from where it is coming.
While Bitcoin proponents love to point out that the Bitcoin payments are easier to track than a credit card as each transaction is registered on a public ledger. However, skeptics argue that even though the transaction of the fund is traceable, the person sending it to remain anonymous. While in the case of traditional payment methods like credit card or debit card, you are almost certain that the identity of the person will be revealed in one way or the other.
Political Donations In Crypto Is Just Promotion
Daniel Weiner, a senior counsel at the Brennan Center for Justice, who also worked for the FEC, as a counsel, says that Bitcoin is like a briefcase full of cash. However, he emphasized that political parties can set up certain standards and rules to ensure that these digital currencies are more traceable, especially when it comes to political funding. Currently, several political parties and payment portals involved in crypto payment take help from payment processors.
Payment processors basically do reverse mining where they verify the blockchain used for the payment, track the money and look for any kind of fraud. Swalwell hired a payment processing firm called The White Company, where donors required to fill a form with complete detail, including their address and the amount of crypto they want to donate. After that, a wallet would be created for the user. The amount specified by the donor would then go the receiver’s personal wallet.
However, the CEO of the White Company said that despite taking so many measures, eliminating frauds related to crypto are near impossible. He says there are bad actors and they try their best to bypass the security arrangements and do something bad.
These bad actors would definitely try to lie on their form or create multiple accounts to donate more than what has been legally assigned. White says its ultimately dependent on the campaigner whether they want to reject such frauds if they find something amiss with the donations.
Why Crypto Is Not A Great Political Campaign Funding Options
Apart from the issue of anonymity making it difficult for the FEC to track down a donation to its actual contributor, another factor which makes crypto funding a non-practical option is the high volatility rates. Due to constant fluctuation in prices, which might even swing by double digits in a matter of a few hours. Thus, as per FEC guidelines, donation amount must match with the same as reported. Given the price volatility, this amount is prone to change every 15 minutes thus it will be immediately nullified.
The maximum amount fixed by the FEC for political donations stand at $28,00, imagine you have donated $28,00 worth of crypto, and within 10 minutes of your deposit, the prices jump by 2%, thus your donation would be deemed invalid, the second it moves above $28,00.
White suggests one must immediately liquidate the crypto donations and does not fall for the rise in prices, as it might get invalidated altogether. White says, “If you are long on bitcoin and you think it’s going to go up, you can risk your campaign funds on it.”
The Presidential candidates who have been accepting crypto donations agree that the major reason is to project themselves as the leader of the young who understands the technology everyone seems to be so bullish about. He explained, “Bitcoin is the future and we’re running a campaign for the future. We want to show and demonstrate knowledge of these emerging technologies and lead by example.”
Swalwell accepts the fact that he is not as tech-oriented as his colleague Yang, and the main reason was to appeal to the young voters. He explained,
“I am of the generation that is inventing blockchain technology and investing in crypto,“To take on these issues of automation, artificial intelligence, the future of work, you need a president that is going to embrace technology and not be afraid of it.”
The critiques against the use of crypto donations for political funding are correct to a certain extent, as the features of Bitcoin or crypto are not well-suited for the transparency required in managing those funds. Add the volatility factor to that, and the picture gets clearer on why it should not be the part of political donations. The number of candidates which has reduced to just one, accepting crypto donations also tells you the story. It is not like the two candidates were accepting only crypto payments either, so the main idea behind it was to appeal to the young voters and crypto believers.
In order to promote the cause of crypto, the best foot forward is to educate the masses of its advantages and disadvantages. Fight for its legalization and mass adoption in the parliament, whether you are in power or in opposition.