Michigan Will Not Allow Crypto Campaign Contributions

Because cryptocurrencies are volatile, are not accepted as legal tender anywhere in the world, are not handled by banks and can be transmitted anonymously, without new legislation, the State of Michigan will not be allowing candidates there to accept cryptocurrency campaign donations.

These points were  stated in a letter by Ruth Johnson, Secretary of State for the state of Michigan on November 8th

Ms. Johnson was writing in response to an inquiry from William Baker, a candidate running to represent Kalamazoo in the Michigan House of Representatives.

Baker wrote the Department of State on August 31st, 2018 to ask it to give a ruling as to, “whether a digital currency exchange is a valid secondary depository,” for cryptocurrency campaign donations under local law.

Baker reportedly wrote that he regarded it as, “self-evident that digital currencies are a valid way to receive political contributions,” but asked for clarification as to how he should value and use them:

“(T)he main issues yet to be resolved are how to record their value and how to use them once they have been received.”

But the department/Ruth Johnson, “respectfully disagree(d) that it is ‘self-evident’ that digital currency is a valid way to receive political contributions…”:

“The law does not authorize such a vehicle, and the Department has never determined that digital currencies are a valid way to receive political contributions.”

The Department of State also declined to give a ruling regarding Baker’s request about the validity of exchanges, based on the fact that Baker had failed to provide a factual basis for requesting the ruling:

“The MCFA and Administrative Procedures Act (APA)…required the Department to issue a declaratory ruling if an interested person submits a written request that presents a question of law and a reasonably complete statement of facts…As the factual statement provided in your letter is insufficient to support the issuance of a declaratory ruling, the Department issues this interpretive statement in response to your request.”

The letter then provides a fairly competent appraisal of how the Bitcoin network works, and defines Bitcoin as a, “fiduciary currency (compared to a commodity-based currency) which has ‘no intrinsic value, and derive[s its] value in exchange either from government fiat or from the belief that they [it] may be accepted by someone else.'”

The Department added that the daily price fluctuations of Bitcoin make it function more like a stock than a currency, whereas, for the purposes of the Michigan election act, campaign contributions must have, “…an ascertainable monetary value…one that is exact, precise, and certain.”

As to Baker’s question, the letter states:

“Further the Act requires that committees deposit funds in an account in a financial institution, which is not an option for cryptocurrency.”

The Michigan Campaign Finance Act also, “expressly bars anonymous contributions.”

All told, “Bitcoin and other forms of cryptocurrency cannot be considered a valid contribution as defined by section 204 (in Michigan and)…(n)ew regulations would need to be passed to direct committees regarding the valuation of cryptocurrency in order to comply with contribution limitations set forth in the Act”:

“The Act as currently written simply does not contemplate this type of regulatory scheme, and absent such direction from the Legislature, the Department cannot find that committees may accept contributions made via Bitcoin.”


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