Bitcoin is a form of virtual, peer-to-peer currency that can be exchanged online for goods and services anywhere in the world without using a bank or third party financial institution to host the transaction. Bitcoin currency exchanges offer users an account, or “virtual wallet,” that utilizes multiple layers of cryptography to protect transactions. Once a merchant or individual has received a transfer, the value is calculated by a constantly fluctuating currency conversion rate. Bitcoin transactions are managed collectively by the community of Bitcoin users and are regulated by software and user agreements – unlike traditional currencies, which are regulated by governments, banks or any other central authority. Indeed, the day before the FEC approved the use of Bitcoin, the SEC issued an Investor Alert cautioning the use of Bitcoin, which followed FINRA’s similar alert.
Nevertheless, the FEC found that committees may accept Bitcoin contributions and may purchase Bitcoins with funds from its campaign depository for investment purposes. The FEC also found that:
- Recipients may not make disbursements using purchased Bitcoins because Commission regulations require the committee’s funds to be returned to a campaign depository before they are used to make disbursements.
- Recipients must provide a unique linked address by which an individual may make a Bitcoin contribution only after that contributor provides his or her name, physical address, and employer, and affirms that the contributed Bitcoins are owned by him or her and that the contributor is not a foreign national.
- Like securities a recipient may receive into and hold in a brokerage account, Bitcoins may be received into and held in a Bitcoin wallet until the committee liquidates them.
- Recipients should value the contribution based on the market value of Bitcoins at the time the contribution is received based on contemporaneous documentation or other reasonable exchange rate.
A non-connected committee (i.e. a PAC) called (appropriately) Make Your Own Laws PAC requested the Advisory Opinion. Interestingly, in a comment on drafts of the AO, Make Your Own Laws PAC wrote that it “request[s] clarification as to how this [opinion] applies to earmarks, which we expect to constitute the majority of our activity.” The FEC AO, however, specifically states that because the PAC’s “advisory request neither posed this question nor provided facts concerning it . . [the]opinion does not address MYL’s receipt of Bitcoin contributions earmarked for others.” In other words, the AO doesn’t address the majority of the activity the PAC seeks to engage in – leading to the conclusion that this isn’t the last we’ve heard on Bitcoin.