(Triangle Business Journal Interview August 6, 2018 Edition)
By Harrison Miller
– TBJ News Intern, Triangle Business Journal
As the fall election season begins and North Carolinians prepare to vote, another determination has already been made regarding state election financing and campaign donations.
In July, Kim Westbrook Strach, executive director of the State Board of Elections, announced the board won’t allow political candidates to accept cryptocurrency donations for campaigns.
Cryptocurrency is a digital currency that doesn’t rely on a central bank and can be stored in online or physically on USB drives. Some of the most popular forms of cryptocurrency include Bitcoin, Litecoin, Dogecoin and Ethereum.
The debate arose after Emmanuel Wilder, a Republican running for the North Carolina House of Representatives in District 41, requested formal guidance on accepting cryptocurrency as funding.
Strach, in her letter, wrote, “We do not approve the use of cryptocurrencies to make donations to political committees in North Carolina.”
Strach cited concerns about monetary limits, which are in dollars in finance laws, and said contributions “cannot be made anonymously.”
Strach also pointed to concerns about the State Board of Elections’ ability to regulate contributions as their reason for dismissing cryptocurrency for funding.
But Whitney Christensen, a government relations attorney at Raleigh’s Ward and Smith, said, “Bitcoin is used for everyday transactions now – Overstock, HHGreg, Subway, KFC – they all accept cryptocurrencies and it’s becoming increasingly common. This is just the next frontier.”
She added that the State Board of Elections doesn’t “have a particularly huge staff, so given the size of their team and resources, I can see why they’re concerned they may not be able to regulate the contributions.”
In June, North Carolina passed House Bill 86, which allows for the licensure of cryptocurrency business activity in the state.
The federal government also allows cryptocurrency donations for campaign financing. The FEC approved the currency in 2014, but the U.S. government has substantially more resources than the state to keep track of donations.
Cryptocurrency prices fluctuate, similar to stock prices or foreign exchange rates. Prices can change by the day or minute, depending on what is happening in the market. This changing value can be difficult for campaign financing, which has rules regarding maximum donations.
North Carolina has a $5,200 donation cap per candidate per election for donors, according to Christensen. If someone donates a certain amount in cryptocurrency to the campaign, that value may rise or fall by the time it’s converted to U.S. dollars, potentially causing a violation.
“Bitcoin is cyclical.” said Jim Verdonik of Ward and Smith, a securities attorney who contributes a monthly column to Triangle Business Journal. “Someone who knows the ebbs and flows of the market could give a maximum amount today knowing it’ll change and rise tomorrow.”
But this isn’t unlike accepting foreign currency or corporate stocks as payment, and North Carolina businesses are allowed to accept digital currency for compensation.
“Even my law firm accepts Bitcoin and crypto payments,” said Verdonik. “It’s not very different than accepting Euros. … We just have to convert the money as soon as we are aware the payment is accepted.”
There is also a fear that cryptocurrency is anonymous and can’t be tracked, which may allow “dark money” or outside players to influence state elections. Verdonik says those fears are misguided.
“There’s this misnomer that Bitcoin is untraceable,” Verdonik said. “It just takes a little more work to track it… and it’s very traceable in large quantities.”
This motion could isolate crypto users from the political process. Libertarians are particularly fond of the currency because of its lack of government regulation and for its decentralization.
Verdonik was the moderator for the blockchain panel at the ACG Raleigh Durham Capital Conference in April. There, roughly 500 people attended to learn about cryptocurrency exchanges and the blockchain.
The State Board did provide an alternate method for crypto users to donate to their preferred candidate, encouraging they use reputable exchanges.
“I really like that in the advisory opinion, Strach reminds coin enthusiasts that they can use a virtual currency exchange to convert their cryptocurrency to U.S. dollars and then make their desired contribution,” said Christensen.
Both Christensen and Verdonik believe cryptocurrency has a role to play in everyday life and the political process.
“As crypto becomes more mainstream, more people will begin using it, more retailers will accept it and more candidates will want to be able to use them for financing,” said Christensen. “Ten years from now the state will accept it too.”