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How one state representative raised $1,600 for his campaign — in bitcoins

( <a href="">btckeychain</a> / Flickr)

When New Hampshire State Rep. Mark Warden last ran for reelection, his campaign staff urged him to try something that few other political candidates have dared to do: accept contributions in bitcoins.

It didn't take much convincing. New Hampshire is already a haven for advocates of the virtual currency. Within the first three days, the Republican lawmaker had raised 160 bitcoins, equivalent to about $1,600 at the time. That's not insignificant for a candidate who would go on to collect a total of $11,000 in the 2012 electoral cycle.

Other political candidates have also turned to bitcoins as a fundraising option. Jeremy Hansen, a computer science professor who ran for Vermont's State Senate as an independent last year, accepted bitcoin donations, as did Eric Olson, a North Dakota Libertarian who lost his bid for a U.S. House seat.

Some of Warden's donations came from surprising sources. He found his digital wallet bursting with contributions from places as far afield as Europe and South America after international well-wishers learned of his campaign through the Bitcoin community's tight-knit grapevine.

"They didn't know anything about me or about Goffstown, New Hampshire," Warden said. "But everyone in that world wants to see Bitcoin become mainstream."

Warden quickly realized that accepting international donations could put him on the wrong side of election law. So, he gave back all the money he raised from foreign sources and struck an arrangement with Bitpay, the third-party service that facilitates bitcoin transactions. (Bitpay normally charges a 1 percent fee. But the company wanted Warden's campaign to help drive bitcoin adoption, so it charged him the discounted rate of 0.5 percent, Warden said.)

Earlier this month, a conservative political action committee asked the Federal Election Commission to recognize bitcoin contributions. The Bitcoin Foundation, an industry group, recently met with government officials to discuss possible regulation.

If the FEC rules in Bitcoin's favor, it could grant the currency some added legitimacy.

The demand for an alternative currency for political donations is liveliest among libertarians. Bitcoin users account for an "enthusiastic minority" of the Libertarian National Committee's total fundraising, according to party spokesperson Carla Howell.

"I can say that it has been a worthwhile endeavor so far," Howell told me in an e-mail.

The ballooning value of bitcoins relative to the dollar has the potential to turn some early bitcoin adopters into an important political force. With the price of Bitcoin around $135, the value of all Bitcoins in circulation exceeds $1 billion. Under the FEC's rules, bitcoin-wielding donors likely would still be subject to individual contribution limits. But for people who racked up many bitcoins early on, donating the virtual currency could turn those assets into political influence.

Advocates are divided about how to integrate bitcoins into politics. Some fear that the FEC's stamp of approval might bring additional regulation of the virtual currency, which is precisely what many adherents of the currency are seeking to avoid. For his part, however, Warden thinks federal approval could spur more adoption.

"If we can get the FEC to give its blessing, that helps the movement overall," Warden said. "And it helps some candidates who choose to accept Bitcoin and not put them in any legal or political hot water. That's the camp I'm in."