Now Accepting: Bitcoin

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On January 3rd, 2009, a team of hackers operating under the name Satoshi Nakamoto released a string of code that created a system for exchanging and transferring money online anonymously, outside the gaze of the government. And thus, Bitcoin was born. Five years later, on New Year’s Eve, a group of Bitcoin evangelists launched the New York City Bitcoin Center, located just up the street from the New York Exchange.

At the Center’s launch event, a surprising announcement left many wondering whether Bitcoin may have the potential to become something more than a speculative currency. Congressman Steve Stockman (R-Texas) declared that he will be accepting Bitcoin for his Senate campaign against incumbent John Cornyn. In a YouTube interview, Stockman said he believes that Bitcoin is about freedom: “Freedom to choose what you do with your money, and freedom to keep your money without people influencing it by printing money or through regulation.”

This message will likely appeal to his supporters’ distrust of the Federal Reserve and its loose monetary policy. But will it fly with the Federal Election Commission?

In November, the FEC split 3-3 on a proposal addressing the matter. The three Democrat-appointed commissioners wanted more time to conduct further research on transparency, while the three GOP-appointed members were in favor of accepting the virtual currency.

So although there’s been no assertive answer from the FEC, as of now it is perfectly legal to make and accept Bitcoin donations. If more candidates decide to follow Stockman’s approach, perhaps the FEC will be forced to come up with guidelines for how donations will be treated (as gifts or in-kind?) and whether they can be converted into dollars. Setting those guidelines also means that the FEC, and regulators at large, will need to start addressing questions about how bitcoins should be legally classified. Is Bitcoin a currency, a commodity, or an asset? Its eventual classification will have broad tax implications that won’t be a cakewalk, in terms of regulation.

Another pertinent question: how will Bitcoins actually be put to use for political campaigns? A growing number of businesses accept Bitcoins as direct payment for good and services, but will candidates run into issues of transparency? Gifts worth more than $200 can’t be accepted if the donors aren’t identified. This means that a $500 donation in Bitcoins must be accompanied by the name of the donor — but this policy conflicts with Bitcoin’s promise of anonymous exchanges.

The questions and ambiguities surrounding virtual currency seem to be growing at a faster rate than regulators can keep up with. Take a look at this timeline highlighting Bitcoin’s dramatic year of growth: its value shot up from $13 to over $700.

With 12 million Bitcoins currently in circulation, it’s also clear that Bitcoin isn’t just a hacker movement dedicated to “waging a war against the Federal Reserve” anymore. It’s about buying and selling through an ideologically-inspired exchange that challenges our current relationship with our government, and reflects the changing dynamics of 21st-century capitalism.

 

About Sona Makker

Sona is a first-year law student studying technology law at Santa Clara University. She’s an advocate for online privacy, digital rights, and public access to the public domain. If she’s not arguing with her siblings over whether This American Life is better than Radiolab, you’ll probably find her whipping up vegetarian dishes, or attempting to do a headstand in yoga class.
Posted in: Law, Technology