Federal Election Commission approves bitcoin donations to political committees

Updated at 12:49 p.m.

The Federal Election Commission on Thursday gave a green light to donating bitcoins to political committees, one of the first rulings by a government agency on how to treat the virtual currency.

In a 6-to-0 vote, the panel said that a PAC can accept bitcoin donations, as well as purchase them, but it must sell its bitcoins and convert them into U.S. dollars before they are deposited into an official campaign account. The commission did not approve the use of bitcoin to acquire goods and services.

After the vote, however, individual commissioners offered sharply divergent views on whether their decision limits bitcoin donations to small amounts -- creating more uncertainty about how much of the Internet currency that political committees can accept.

The FEC had deadlocked on a similar question in the fall, with the three Democratic appointees saying they wanted the agency to take more time to study the issue and develop a formal policy to govern the use of bitcoins in campaigns. At the time, some commissioners expressed concern that the virtual currency could be used to mask the identity of donors.

On Thursday, the panel’s vote was swift. The decision came in the form of guidance to Make Your Laws PAC, not an official rule or regulation. But it opens the door to the use of bitcoins by any federal political committee.

In its advisory opinion request, the Make Your Laws PAC said it is seeking to accept bitcoin donations in increments up to $100.

That low sum assuaged the concerns of several commissioners about the risks of the virtual currency, said Commissioner Ellen Weintraub, a Democratic appointee.

"The $100 limit was really important to us," she said. "We have to balance a desire to accommodate innovation, which is a good thing, with a concern that we continue to protect transparency in the system and ensure that foreign money doesn't seep in."

Because the commission only approved the acceptance of bitcoin as specifically described in the request by the Make Your Laws PAC, the decision does not permit contributions of more than $100, she said.

But FEC Chairman Lee Goodman, a Republican appointee to the panel, disagreed. He said that the advisory opinion treats bitcoin donations as in-kind contributions -- not official currency -- meaning that the only limits that apply are the federal caps on all forms of accepted donations. Those limit individuals to giving $2,600 to a candidate per election and $5,000 to a political action committee. Individuals and corporations can give unlimited sums to super PACs.

"To me, the opinion that the commission approved today supports the right of bitcoin users to contribute as they would all other kind things of value," he said, such as silver dollars and works of art.

"This advisory opinion in no way established the outer limit," Goodman added.

The panel was in agreement on the need for transparency about who makes the bitcoin donations. The Make Your Laws PAC pledged to obtain the name, address, occupation and employer of all bitcoin contributors -- even though those details are only required of donors who give $200 and more to federal campaigns.

The FEC advisory opinion also said that committees accepting bitcoin must report their value based on the exchange rate the day the contribution is made. Bitcoin prices were hovering near $440 on Thursday, down from roughly $530 nearly a month ago.

In its decision, the FEC concluded that bitcoins fit the definition of “money or anything of value” that political committees may accept under federal law, while noting that other government agencies, as well as the courts, are still grappling with the question of whether bitcoins should be treated like money.

“The Commission expresses no opinion regarding the application of federal securities law, tax law, or other law outside the Commission’s jurisdiction,” the election commission panel stressed in its advisory opinion.

Goodman said the FEC needed to weigh in on the debate, even though it remains unclear how the government will deal with bitcoin broadly.

"Just philosophically, I think it's important for the FEC to embrace technology and innovation, and that’s what we did today," he said.

Brian Fung contributed to this report.

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