Michigan Secretary of State Bans Bitcoin and Cryptocurrencies for Donations to Political Campaigns
Michigan’s Secretary of State has decided to ban cryptocurrencies from being used as donations to political campaigns. The information was revealed in a letter published last week.
William Baker, Michigan state legislature candidate asked how virtual currency donations should be registered for political donations. He has also asked how it is possible to use them and whether virtual currency exchanges work as valid secondary depositories for holding virtual currencies.
The agency did not react positively about this issue. In a response document, the department did not agree with Baker’s premise that cryptocurrencies are a valid way to receive political donations. The document says that the law does not authorize virtual currencies as a valid donation mechanism.
The letter clearly said that the Michigan Campaign Finance Act defined the contributions made as a donation of money or something that has monetary value. Moreover, it explains that the value of the donation must be precise and certain. However, as we know, Bitcoin is a very volatile asset. The same happens with other virtual currencies that do not qualify for such donations.
The Secretary of State’s office wrote:
“Cryptocurrency is not a mere transfer of controlled funds deposited or withdrawn through a financial institution, but rather is traded anonymously through an electronic platform. As with stocks and commodities, Bitcoin0s worth fluctuates daily, there is no way to ascertain the precise monetary value of one Bitcoin on any particular day.”
Nevertheless, Michigan is not the only state in the country that took the decision to ban these virtual currencies from political donations. Back in September, California said that it would not be allowing these digital assets to work as a means of donating funds to candidates. In this case, it is possible to receive crypto donations under $100 dollars and the funds should be converted to cash upon receipt before its deposit.
Stephen Middlebrook, a recognized fintech attorney with Womble Bond Dickinson, explained that campaigns can accept nonmonetary contributions. These are typically valued at the market price at the moment the donation is received. About it, he says that it is not clear why this rule does not apply for virtual currency contributions.
Moreover, the Federal Election Commission took a decision back in 2014 that PoliticalAction Committees (PACs) could accept cryptocurrency donations. Nevertheless, it would be very important to collect information on the donor and the value of the contribution made.
A good solution that Middlebrook mentioned is to allow virtual currencies to be used for political donations but the individual receiving the virtual currencies should be obligated to sell and register this information within 24 hours. However, anonymous donations are also forbidden.
“Campaigns can accept donations of doughnuts and coffee, both of which are anonymous, without violating the law,” he added. “They just need to know who brought in the pastries.”
Back in May, Brian Forde, a Californian Democrat running for Congress was attacked for receiving virtual currency donations for his campaign.