Political contributions are often done in a back-room setting to stay within regulatory limits, but Rand Paul of Kentucky has taken the next step in campaign secrecy by announcing that he will be accepting Bitcoins to fund his run as a presidential candidate. For the Libertarian Paul, accepting Bitcoins fits with his platform and may even draw some votes from supporters of the virtual currency if he remains as the only candidate accepting them. The new campaign funding option is the first for a presidential candidate, but he is preceded by politicians running for state and federal positions in states like California and New Hampshire.
Novelty aside, Mr. Paul’s acceptance of a virtual currency that cannot be traced back to an owner/contributor presents another challenge to campaign reform as the only way to track contribution amounts from individuals and entities is to have their identities revealed at the time the contribution is made. Considering that anonymity is one of the key benefits of doing transactions in Bitcoins, disclosing identities does not look like something that all donors will be interested in following.
The anonymity provided by Bitcoins may also allow funding from individuals and entities that are currently forbidden by campaign contribution laws, including foreigners as well corporations. Another door that will open for forbidden contributions will be those coming from straw donors, which are defined as people who illegally use another person’s identity or allow their name to be used by someone else to provide campaign funding. This tactic is used primarily to stay within limitations on contributions, and could be facilitated by providing funds in the form of Bitcoins.
The bar for limits on political contributions is actually set at a low level already, as campaigns are “expected” to commit their “best efforts” to disclose individuals who contribute more than $200 to a single politician as well as to self-police contributions that may be illegal. In an interview with the New York Times, Richard L. Hasen, a campaign finance expert at the University of California, Irvine, School of Law said, “At some level, we are trusting candidates,” and added, “The system already relies on some measure of trust from candidates…but the difference with Bitcoin is that it is inherently untraceable.”
As yet unknown is how the value of volatile Bitcoins will be calculated. For example, there is some debate as to whether additional contributions would be allowed if the value of the currency should decline. One suggestion was made by the chairman of Federal Election Committee that ruled on the acceptance of Bitcoins for political campaigns in 2014. In his summary, Lee E. Goodman wrote that Bitcoin contributions should be regulated in the same manner as other in-kind contributions such as art and securities, both of which can be volatile as well.