Crypto’s preferred currency for political donations is not Bitcoin. It’s dollars
(Bloomberg) – Cryptocurrency leaders are spending money to exert influence in Washington as their industry soars, but they don’t appear to be using their own product to do so.
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Industry insiders gave $7.3 million to political campaigns and committees in 2021 through the end of January, but nearly all of that money came in old-school dollars.
The disparity highlights the challenges that cryptocurrencies face as they move into more mainstream sectors of the economy. According to a Bloomberg analysis of Federal Election Commission records, just $580,000 worth of cryptocurrency has been donated to political committees in the current election cycle, with a handful of super PAC donations making up the bulk of the total. Not all of these contributions came from crypto industry donors.
Ultimately, it is difficult to track how much crypto is spent on politics. Some committees that have received crypto contributions have not followed FEC guidelines for reporting them, and groups that study money in politics do not follow them.
“Donations made with cryptocurrency are very difficult to identify in campaign finance data,” said Sarah Bryner, director of research and strategy at OpenSecrets, which studies money in politics.
One of the reasons crypto is not widely used for campaign donations is the way the FEC regulates it. While crypto donations have been permitted since 2014, reporting is complex, and campaigns and committees must convert assets to dollars before spending the money, which incurs processing fees.
The FEC rules also require significantly more record keeping and disclosure for cryptocurrency contributions. And the online platforms serving Democrats and Republicans, ActBlue and WinRed, don’t even accept them.
“There’s a lot of administrative hassle to go through,” said Bill Powers, a political law partner at Nossaman LLP.
Conversely, reporting dollar contributions – whether made by check, credit card or cash – is much simpler.
It is unclear whether the rules for using crypto in politics will soon be simplified.
In an executive order signed last week, the White House called on government agencies to coordinate what has until now been a dispersed approach to the asset class. However, it does not provide clear guidelines on regulation.
Powers said that as digital assets become more familiar in the broader economy, they will also be more familiar in politics.
“Crypto is becoming more mainstream, and as campaign season heats up with outside groups making big ad buys, we’re going to see the use of cryptocurrency to make political contributions intensify” , Powers said.
Some big crypto donations have started coming in. GMI PAC Inc., a new super PAC that says it will back pro-industry applicants, said it received $350,000 worth of cryptocurrency from mid-December to mid-January, according to its filing with the FEC. This included a cryptocurrency donation worth nearly $200,000 from Vance Spencer, a venture capitalist whose company invests in blockchain technologies.
But the super PAC raised a lot more — $4.8 million — in dollars. Samuel Bankman-Fried, founder and CEO of crypto derivatives exchange FTX, gave away $2 million – none of it in crypto.
And little of the crypto that is donated for political purposes goes directly to campaigns. The main recipient of the cryptocurrency so far is Republican Blake Masters, Peter Thiel’s protege and Republican Senate candidate from Arizona. Masters raised the equivalent of $166,000 in crypto, paying Coinbase Global Inc. $1,133 to convert much of that amount into cash.
Democratic Senator Ron Wyden of Oregon, who has been a supporter of the crypto industry, raised around $30,000 in digital currency. Like Masters, he used Coinbase to convert donations into dollars he could spend.
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