Bitcoin, the virtual currency that exists as alphanumeric strings online, is on the verge of getting into politics. The Federal Election Commission is expected to vote Thursday on a proposal to allow bitcoin contributions to political action committees — even as skeptics say that bitcoins could undermine the disclosure standards of federal law. The FEC is acting as other federal agencies are also exploring the uses, and dangers, of digital currency. At a Senate hearing on Monday, federal law enforcement officials cited Silk Road, an online illegal marketplace that used bitcoin before it was shut down. Edward Lowery III, chief of the Secret Service Criminal Investigative Division, told the panel: “While digital currencies may provide potential benefits, they present real risks through their use by the criminal and terrorist organizations trying to conceal their illicit activity.” Still, no one at the Senate hearing wanted to stifle virtual currency, and neither does the FEC. The commission was brought into the issue by the Conservative Action Fund, a political action committee that is seeking approval to accept bitcoins as contributions.
“Our interest here is we know this is happening, we’re getting requests to make this happen. We really want to understand: How do we do this right?” said Dan Backer, the PAC’s lawyer, at an FEC meeting on Nov. 14.
But the six commissioners weren’t sure about nongovernmental currency, as commission chairwoman Ellen Weintraub, a Democrat, acknowledged.
“The field of people out there who are more knowledgeable about how bitcoins work than we are is probably vast,” she said. “So if any of those folks want to comment, we would welcome that.”
Some still-unresolved questions: If a PAC like the Conservative Action Fund can accept bitcoins, what can it do with them? Could it give bitcoin contributions to a candidate? Or would it have to convert them into U.S. currency?
And a bigger question: What about transparency? PACs and candidates have to publicly identify their donors. There are contribution limits to comply with, and basically no money is permitted from foreign sources.