If and how digital currencies such as bitcoin can be used to make campaign contributions in Wisconsin remains an open question after the state Ethics Commission considered it Tuesday.
The commission was asked by the Libertarian Party of Wisconsin to give guidelines for the use of digital currencies in campaign giving and spending.
Commissioners discussed and held a public hearing on the request Tuesday but did not immediately act. Asked when the commission might revisit the issue, its staff counsel, David Buerger, said its closed-session deliberations on the matter are confidential and he could not comment on them.
Buerger said in the absence of clear direction from the commission, campaigns “would be accepting the crypto-currency contribution at their own risk.”
The anonymity inherent in digital currency transactions caused at least one commissioner, Republican Pat Strachota, to balk Tuesday at the prospect of sanctioning their use.
“If we can’t accurately and immediately describe who’s donating these funds, there’s a hesitation on my behalf to allow it,” Strachota said.
Digital, or crypto-, currencies, of which bitcoin is the most widely known, are new online-only forms of currency that are not governed by authorities such as a central bank and that allow users to spend money anonymously.
The “coins” are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies.
Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators — and criminals.
The request to the commission from Phil Anderson, chairman of the Libertarian Party of Wisconsin, argues that digital currencies “are more and more widely accepted as currency and as stores of value.”
“The (Chicago Board Options Exchange) offers a futures market for bitcoin, and other financial platforms, corporations and governments are weighing in on not ‘whether’ to address crypto-currencies, but ‘how?’ ” Anderson wrote to the commission in the request.
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Among Anderson’s questions to the commission is how such digital currency contributions would be counted toward state campaign contribution limits set in dollars.
The state of California has urged campaigns not to accept digital currency contributions — though it does not prohibit the practice. The Federal Election Commission permits digital currency to be donated to campaigns for federal office, counting such donations as “in-kind” contributions, such as a gift of materials.
Buerger said Monday that he’s not aware of any instances in Wisconsin in which digital currency contributions to state campaigns were given or accepted.
Commissioners suggested during Tuesday’s discussion that if digital currency were counted as a monetary, rather than in-kind, contribution, it potentially would be subject to a $100 contribution limit in state law that applies to cash contributions. The law says any larger contribution must be made by means such as a credit card or check.
Digital currencies lack the sort of central authority such as the U.S. Treasury and Federal Reserve System, which print and manage the U.S. dollar. For that reason, they have been championed by those, such as many libertarians, who oppose government control of currency. Bitcoin speculation, and a recent spike in its value, also has drawn attention to it.
Critic calls it a ‘fraud’
Bitcoin and other digital currencies have plenty of critics in the financial world. J.P. Morgan Chase CEO Jamie Dimon has called bitcoin “a fraud,” while mega-investor Warren Buffett has said the hubbub over digital currencies “will come to a bad ending.”
Unlike a check or credit card payment, a bitcoin transaction provides no form of positive ID — unless the sender independently confirms the transaction, said Brad Chandler, who directs the Nicholas Center for Corporate Finance and Investment Banking at UW-Madison. Chandler said that could make it possible to more easily evade certain restrictions on campaign giving.
A potential solution, Chandler said, might be to require contributors to use a tool such as bitpay, which enables users to essentially cash in bitcoin for US dollars, before they give to a campaign.
State Rep. Jimmy Anderson, D-Fitchburg, said in a Twitter post Tuesday that permitting digital currency to be used for campaign giving “is really dangerous for about a dozen reasons.”
“The ability to conceal who is making the contributions alone is going to make this an ethical nightmare,” Anderson wrote.
The Associated Press contributed to this report.