Legislators decide to lift the ban on Crypto Donations for Political Campaigns
The change began a few months ago when the Fair Political Practices Commission (FPPC), acting as a state regulator, initiated discussions to amend the ban. After several deliberations, the commission held a vote on Thursday, 21 July 2022. The result was a decision to approve new regulations that allow donations of cryptocurrencies like Bitcoin. This move enables both state and local offices in California to accept crypto donations for political campaigns.
Are there limitations on Bitcoin usage in California’s Political Campaigns?
It’s an exciting development for California, as it opens the door for crypto donations in political campaigns. The state appears to finally recognize the permissionless, global, and pseudonymous nature of cryptocurrency. However, it is important to understand the specific rules governing how crypto can be used in political campaigns within the state.
The key point is that political candidates cannot hold onto crypto donations. They are legally required to convert all crypto donations into fiat currency, specifically U.S. dollars. This rule prevents crypto donations from being affected by market volatility, as CryptoChipy reported. In a statement received by CryptoChipy, it was noted that “The rules say candidates can accept cryptocurrency donations if they immediately convert the digital currency into U.S. dollars.”
But what does “immediately” mean? For example, if a candidate receives a Bitcoin donation at 1 AM, does it have to be converted by 7 AM, within 2 hours, or is it acceptable to wait 24 hours? The guidelines on timing are not entirely clear.
Additional requirements regarding KYC
Further details on the new rules for lifting the ban have emerged. One key stipulation is that political campaigns must use payment processors that are registered with the United States Department of Treasury. In addition, all state and local campaigns must have proper Know Your Customer (KYC) procedures in place to verify contributors’ identities. According to the approved legislation, campaigns must record contributors’ names, addresses, occupations, and employers. If these details cannot be verified, the contributions will be considered illegal and invalid.
What about unlawful contributions?
David Bainbridge, the general counsel for the Fair Political Practices Commission (FPPC), clarified some of these conditions during the approval meeting on 21 July 2022. He explained that the commission had to address the risks associated with cryptocurrency when drafting the regulations. He highlighted that cryptocurrency could enable illegal contributions, whether intentional or untraceable, thus complicating identity verification.
David Bainbridge further explained that the commission was well aware of these risks, which contributed to its decision to ban cryptocurrency donations in 2018. The new regulation prohibits crypto donations from anonymous or foreign sources, with CryptoChipy viewing this measure as a way to prevent foreign interference in political campaigns.
Rising Crypto Adoption in California?
This new regulation may signal California’s growing embrace of cryptocurrency. However, it should be noted that while crypto donations can be accepted, they must be immediately converted to U.S. dollars. This indicates that California allows crypto donations but does not see the long-term value of holding onto digital currencies.
Despite the strict conditions, CryptoChipy considers the new rules favorable, given the other options that were available, such as completely banning crypto donations or limiting donations to $100.
The new regulations are expected to take effect in two months. California had been one of nine states to ban crypto donations in the past. According to a recent CryptoChipy report, 12 states, including Washington D.C., now allow some form of crypto contributions to political campaigns. This variation in state regulations reflects the diverse approach to cryptocurrency in the United States.
In California, candidates are already benefiting from the lift on the ban by receiving crypto donations. Some campaigns have even adopted the Bitcoin Lightning Network for donations. Aarika Rhodes, a candidate for California’s 32nd congressional district, shared her use of crypto technology in a tweet from November 2021, urging supporters to donate to her campaign via Bitcoin.
