Political Campaigns Are Facing Risks With Crypto Donations On Coinbase And BitPay
In preparation for the 2022 midterm elections, more candidates than ever have begun accepting donations in cryptocurrency. As a result, major crypto platforms have begun marketing themselves to candidates as donation processors. But the platforms intentionally obscure the identities of people using their services, which makes it harder for campaigns to find out if donors are who they say they are — and follow campaign finance laws.
The two largest cryptocurrency platforms in the space, BitPay and Coinbase, anonymize transactions by creating a new “wallet address” (a random string of numbers and letters) for each user each time they transfer money. This is a common feature of cryptocurrency platforms, intended to prevent observers from using public blockchain explorers to identify the people behind each transaction.
But the feature can also prevent campaigns from verifying that their donors are who they claim to be. The Federal Election Commission requires candidates to collect and disclose donors’ names, addresses, and employers, which they can normally do by matching a donor’s name to the name on a check or the address on a credit card. But with intentionally obscured wallets and no such verification available through BitPay and Coinbase, campaigns must rely on crypto donors truthfully filling out a simple web form with few mechanisms to ensure it’s accurate. This poses the risk that crypto donors could engage in fraudulent or otherwise illegal giving, leading campaigns to fail to report the cryptocurrency given to them, whether negligently or nefariously.
BitPay does offer an opt-in system for any transparency-minded users who wish to keep one consistent, auditable wallet address. Campaigns, which register with BitPay as “business accounts,” also have consistent wallet addresses. But because the feature is opt-in, it’s likely that few donors have it enabled — which means campaigns would not be able to corroborate a donor’s statement of identity with their public blockchain activity.
BitPay spokesperson Jan Jahosky declined to answer questions about whether the platform conducts any identity verification checks on people donating to campaigns through its platform. By contrast, Mike Naple, a spokesperson for the progressive payment processor ActBlue, told BuzzFeed News that the company “employs multiple checks” to “detect financial fraud.” Coinbase did not respond to a request for comment.
While it has been legal to donate to campaigns using cryptocurrency since 2014, the floodgates opened last June, when the National Republican Congressional Committee announced that it would begin accepting donations in crypto. Since then, candidates from across the ideological spectrum have embraced crypto donations, and pro-crypto PACs have announced ambitious spending goals for 2022. Blake Masters, a conservative candidate for Senate, recently told supporters on Twitter to “DM me to donate in crypto” and has sold NFTs to support his bid. Masters did not respond to a request for comment.
In preparation for the 2022 midterm elections, more candidates than ever have begun accepting donations in cryptocurrency. As a result, major crypto platforms have begun marketing themselves to candidates as donation processors. But the platforms intentionally obscure the identities of people using their services, which makes it harder for campaigns…
