A formal letter sent by the Michigan Secretary of State sees the use of crypto-currencies for political donations formally barred. The letter which was published on 8th November was in response to state legislature candidate William Baker, who had asked how crypto-currency value was supposed to be recorded for political donations. Baker had also sought to find out whether crypto exchanges qualified as valid secondary depositories for storing virtual assets.
The state department issued its response through the letter, where they dismissed Baker’s automatic assumption that cryptos were a valid way of receiving political donations. The letter stated that the law did not authorize crypto to be used, adding that the department had never authorized crypto as a valid way to receive political contributions. The letter made reference to the Michigan campaign finance act which defines political contributions as; donations of money or other things of ascertainable monetary value, emphasizing that the value of donations must be exact, certain and precise. Bitcoin and other Altcoins are far too volatile to qualify as such.
The secretary of state stated in the letter that; “Crypto-currency is not a mere transfer of controlled funds deposited or withdrawn through a financial institution, but rather is traded anonymously through an electronic platform.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, Bitcoin’s worth fluctuates daily, there is no way to ascertain the precise monetary value of one Bitcoin on any particular day. Further, the Act requires that committees deposit funds in an account in a financial institution, which is not an option for crypto-currency”.
Michigan joins California as another state that has openly barred crypto political contributions. Fintech attorney with Womble Bond Dickinson, Stephen Middlebrook, however threw a spanner in the works stating that campaigns already allowed “non-monetary and in-kind contributions” typically valued at the fair market value of the goods when received” as such he further said “it’s unclear why that rule wouldn’t work for virtual currency contributions. The fact that the value of crypto-currency or other goods donated to a campaign may fluctuate over time doesn’t sound like an insurmountable obstacle.”
In contrast, the federal election commission in their May 2014 ruling stated that political action committees (PACS) could accept small dollar amounts of crypto. The PAC accepting the donation was required to value the contribution based on market value and identify the donor. According to Middlebrook, the federal rule is more flexible and sets a template for states to follow. Middlebrook also suggested that states opposed to crypto donations had the option of requiring candidates to liquidate their crypto contributions within 24 hours of receipt.
Middlebrook also took issue with the Michigan state official’s problem with anonymous crypto donations, citing that the states had the ability to avert this by taking steps to identify donor identities. When reached for comment, William Baker, the state legislative candidate who ended up losing the November 6th poll, remarked that he hoped more politicians who understood crypto-currencies would make it into office.
