List of US States’ Cryptocurrency Political Donation Regulations

How the US States Are Regulating Political Donations in Crypto

Following the rude shock of the outright ban of any and all cryptocurrency donations to any political campaign in California, the crypto community is now beginning to x-ray how the U.S government is regulating political donations in crypto.

The ban in California came as a surprise seeing that the state is considered the home to the world’s largest technology hub as well as a candidate for congress, whom Bloomberg calls the ‘Crypto Candidate for Congress.’

Crypto and Political campaign donations: The journey so far

The hard-handed regulatory precedent in the run-up to November’s elections has been a work in progress despite coming across as surprise. Observers say the state’s Fair Political Practices Commission (FPPC) had given positive signals about a month ago when the commission considered the status of cryptocurrencies in state-level political campaigns.

At the time, commissioners showed reluctance to ban cryptocurrency from elections outright and expressed their willingness to do further research, hence the shock of the outright ban. What possibly are the basis for the ban?

It’s all about political fair play

The FPPC said the ban is in tandem with its mandate to enforce the 1974 law called the Political Reform Act — a major piece of anti-corruption legislation enacted in the wake of the Watergate scandal. Aimed at eradicating corrupt practices in state government, the law seeks to limit the amount of money spent in elections and eliminating contributions from anonymous donors.

The FPPC had issued a notice about the upcoming vote on the permissibility of cryptocurrencies for campaign contributions and expenditures. There were two main points of contention visible from the document released.

There was the question of whether cryptocurrencies should be treated the same as cash — and as such subject to same regulations — and on the other hand another concern is the clause in the Political Reform Act that prescribes that a committee should only have one bank account in order to facilitate oversight.

The potential solutions suggested are a blanket ban on using crypto for campaign contributions and campaign expenditures; capping crypto contributions at the same level as cash donations (i.e., $100); requiring that cryptocurrency contributions be converted to fiat and deposited to a campaign’s single account; allowing committees to establish separate cryptocurrency accounts and make expenditures from them; classifying cryptocurrency contributions as in-kind and thus removing the cash cap.

These, however, were just preliminary policy options that left the door open for any other language at the commission’s discretion.

A cursory look into the steps and decisions of the FPPC members highlights a pacesetting decision on a larger scale, considering the extent of the scope and character of the issues that state-level watchdogs face when grappling with regulation of crypto in elections.

Elsewhere in the country, regulation of political contributions made in cryptocurrencies remains scarce leaving only one in five states that has any kind of ruling on the matter.

Existing state-level regulations across the US

The Wisconsin State Ethics Commission, when confronted with a request to resolve the issue of cryptocurrency’s status as a vehicle for political contributions in April this year, opted to pass it on to the state legislature. As of late September, the Wisconsin State Assembly hasn’t yet addressed the issue.

In Kansas, the Governmental Ethics Commission suggested that digital currency was ‘too secretive’ to be used in campaign finance. However, in District of Columbia the Board of Elections introduced new rules to Title 3 (Elections and Ethics) of the District of Columbia Municipal Regulations, and stated that ‘Bitcoin contributions’ can be accepted following strict rules of how it is to be liquidated and reported as in-kind.

Elsewhere in Colorado, Colorado Secretary of State approved amendments to the Campaign and Political Finance Rules that first mentioned cryptocurrency contributions. The new regulation holds donations made in digital money to the same limit as regular cash donations.

In Massachusetts, it is not allowed to directly use crypto for campaign expenditures, since state law holds it that any campaign purchase exceeding $50 should be paid for with a check from an official committee account. For Montana, receipt of crypto contributions is permitted, but expenditures can only be made out of a ‘primary campaign depository,’ hence there can be no such thing as the candidate’s official crypto wallet.

Meanwhile, for North Carolina the State Board of Elections Campaign Finance Office said no crypto donations are allowed citing the regulator’s inability to adequately handle such contributions, as well as the fact that it is impossible to reliably ascribe value to crypto assets.

However, Oregon took a more flexible stance by having a set of rules designed to mirror the FEC’s approach of allowing contributions but not expenditures to be made in cryptocurrencies.

In South Carolina, the House Legislative Ethics Committee recommended against crypto campaign donations last stating that since the statutory definition of a contribution does not include anything like cryptocurrencies or digital assets.  Tennessee law treats digital currency contributions the same as cash contributions, mandating that crypto is liquidated before it can be spent for campaign needs.


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