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Digital currencies flow into campaigns, but government rules vary

For congressional candidate Shrina Kurani, cryptocurrency is not just the future of money, but a transformative technology that could revolutionize campaign finance and attract a new generation of voters.

She is among an avant-garde of candidates campaigning for campaign donations in digital currencies like bitcoin.

“We’re a campaign that appeals to a large segment of the population, especially younger people,” said the American-born daughter of Indian immigrants, who is in Tuesday’s primary as she seeks the Democratic nomination for a congressional seat east of Los Angeles .

Kurani’s foray into digital currency to fund her campaign wouldn’t be possible if she were running for the California Legislature or any other office within the state. While the federal government allows political donations in cryptocurrency, California does not, after banning the practice four years ago.

The difference underscores not only the rising popularity of cryptocurrencies, but also how much regulation varies across the US

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Some states, including Arkansas and North Carolina, also do not allow cryptocurrency donations to state races under existing campaign finance laws. Others have followed federal rules for congressional candidates, allowing donations with disclosure requirements and contribution caps typically set at $100. Still other states, including Hawaii, Idaho, and South Dakota, have not adopted specific guidelines for digital currency donations.

Digital currencies offer a bank-independent alternative. Instead, transactions are validated and recorded in a decentralized digital ledger called a blockchain.

Perianne Boring, founder and CEO of the Chamber of Digital Commerce, a trade association representing the blockchain industry, compared the use of cryptocurrency in politics to former President Barack Obama using smartphone technology and Donald Trump using social media uses.

“Blockchain technology can increase participation in the political process in very positive ways,” Boring said, noting that this is particularly true for younger people and members of minorities who may be skeptical about traditional methods of money.

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Critics say the potential downside is a lack of transparency — not knowing who is ultimately behind the donation.

Beth Rotman, director of the Money in Politics and Ethics Program for non-partisan watchdog group Common Cause, worries traceability is more difficult with cryptocurrency.

“In campaign finance, you want disclosure. They need backup information,” Rotman said. “I know (cryptocurrency) is sexy and signals to people that you’re a hot new candidate, but there has to be a better way than compromising the other parts of the campaign finance system.”

Timothy Massad, former chairman of the US Commodity Futures Trading Commission, is also concerned about disclosures.

“The danger is that I think this is still a sector where there is insufficient regulation, particularly around the risk of illegal activities and money laundering,” said Massad, currently a research fellow at Harvard’s Kennedy School of Government University.

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Cryptocurrency donations have been allowed in federal elections for years after the Federal Elections Commission allowed their use in a 2014 statement.

The commission said policy committees should evaluate digital currency contributions based on market value at the time the donation was received. Candidates must also return posts that come from prohibited sources or exceed post limits.

In the 2017-18 election cycle, cryptocurrency donations reported to the Federal Election Commission totaled just over $1.2 million. They have reached about $500,000 so far in the current cycle, which still runs months before the general election.

Shortly after the Federal Elections Commission allowed cryptocurrency donations, then-US Rep. Jared Polis, a Democrat, began promoting it. Polis, now Colorado governor, is seeking similar contributions while running for re-election, with cryptocurrency donations capped at $100.

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“Through campaigns that accept cryptocurrency donations, we can demonstrate the safety, accessibility, and possibility of using crypto in various types of transactions, and also help spread the message that Colorado is a home of innovation,” said Amber Miller, Spokeswoman for the Polis campaign.

As the popularity of digital currencies increases, some states that have banned cryptocurrency contributions are reconsidering.

Jay Wierenga, spokesman for the California Fair Political Practices Commission, said the agency will review its ban later this year.

“The Commission always strives to keep up with and stay one step ahead of the changing universe surrounding political activity,” Wierenga said.

Oregon is one of the more innovative states when it comes to elections, having been the first to adopt absentee ballots. But in 2019, Oregon banned candidates running for office within the state from accepting cryptocurrency donations. And that’s despite the fact that former Secretary of State Dennis Richardson, a Republican, said they should be viewed as “a new and innovative way to expand participation.”

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Two months after Richardson died of cancer in 2019, the Oregon legislature closed the door on such donations. As the Senate geared up for the vote, Sen. Jeff Golden, a Democrat, said, “One of the widespread goals of this legislative session is to increase the transparency of money in politics, and cryptocurrency tends to go in the opposite direction.”

This sentiment is not unanimous. One of the few state lawmakers to oppose the ban on cryptocurrency donations was Republican Rep. Bill Post. He said a lot of people in the legislature just didn’t get it.

“I don’t want (us) to sound like a bunch of old fuddy duddies here,” he said. “Let’s update the 21st century.”

Jesse Grushack, 30, is one of those voters who likes cryptocurrencies and supports their use for political donations. The New Yorker donated to the campaign of Democrat Matt West, a fellow cryptocurrency enthusiast who had a failed bid for a congressional seat in Oregon earlier this year.

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“At this point in American politics, I want to support everyone who is pro-crypto,” Grushack said.

Kurani, 29, said her embrace of cryptocurrency was more than just a chance to show off her tech credentials. It’s also a way to reach those for whom the digital alternatives to the US dollar are becoming the legal tender of choice.

She downplays concerns about donor secrecy, saying her campaign converts crypto donations into dollars and tracks the same information — name, address, employer, occupation — that she would for every donor.

“We’re really making sure we can represent Americans participating with new types of digital currency,” she said.

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Associated Press Data journalist Camille Fassett in Oakland, California and AP contributors Audrey McAvoy in Honolulu; Stephen Groves in Sioux Falls, South Dakota; and Keith Ridler of Boise, Idaho, contributed to this report.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission.

https://www.local10.com/news/politics/2022/06/05/digital-currencies-flow-to-campaigns-but-state-rules-vary/ Digital currencies flow into campaigns, but government rules vary

Sarah Y. Kim

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