California Lawmakers Vote to Allow Political Campaign Donations in Cryptocurrencies

Cryptocurrency has grown increasingly popular in the past decade partly because of its enhanced security, privacy and anonymity. This anonymity is one of the primary reasons California regulators outlawed all political donations in cryptocurrencies in 2018. State regulators cited the possibility of political interference by foreign players as well as the chance that digital assets could be used to surpass campaign contribution limits.

After more than three years since the ban on cryptocurrency donations, lawmakers in California have voted to allow political campaign donations in Bitcoin and other digital currencies. Municipal and state political candidates will now be able to receive donations in cryptocurrency within California campaign contribution limits after the Fair Political Practices Commission announced that the previous ban was lifted.

However, political candidates who receive cryptocurrency donations will have to adhere certain conditions. First, of course, is to keep the donations within the state’s donation limits. Furthermore, the campaigns will be required to immediately convert the cryptocurrency donations into U.S. dollars exclusively using U.S. Department of Treasury registered payment processors.

Campaigns that dabble in cryptocurrency donations will also require “adequate KYC procedures” that would allow the commission to form a reasonable belief that it knows the true identity of each contributor who used crypto. These donators would have to provide their full names, addresses, occupations and employers for their donations to be considered legal and valid by the FPPC.

FPPC General Counsel David Gainsbridge says that the commission is aware of the risks presented by the anonymity afforded by crypto, especially in regard to illegal donations, noting that sometimes cryptocurrency payments are untraceable. Speaking at an approval meeting last week, he said that legislators had to keep these concerns in mind when drafting the regulation because they were the very reason the commission banned crypto donations four years ago.

As such, political campaigns will not be able to receive anonymous cryptocurrency donations, most likely to limit interference by foreign players. Additionally, they will be required to convert any crypto donations into U.S. currency, showing that the state doesn’t see any merit in holding the donations in crypto for the long term.

State regulators first started considering overturning the ban in May, with FPPC communications director Jay Wierenga saying at the time that the commission had been considering reviewing the ban since 2021. The commission scheduled a prenotice discussion in its May 2022 agenda and welcomed public comments on the crypto donation ban before doing an official review.

The announcement lifting the ban on cryptocurrency donations to political campaigns in California most likely confirmed to blockchain fintech companies such as LQwD FinTech Corp. (TSX.V: LQWD) (OTCQB: LQWDF) that the time for blockchain to transform the world has indeed arrived.

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