The recent conversations in Congress regarding the Infrastructure bill have highlighted the significant impact cryptocurrency has on everyday citizens. This article outlines ways for present and future members of Congress, elected officials, and engaged citizens to deepen their understanding of crypto and, specifically, how to utilize it for fundraising through crypto donations.
Intro
A notable trend among voters has emerged, with certain demographics being cash-poor yet crypto-rich. Providing a convenient method for accepting campaign donations in crypto can lead to increased involvement from these groups in ongoing political activities.
Enabling supporters to contribute using cryptocurrency sends a strong message that the campaign is progressive, innovative, and attuned to modern trends.
Donations made via blockchain are more affordable; conventional payment processors typically charge between 2% and 4% along with additional fees. (According to 2018 mid-term statistics, the $3.7 billion in donations from individuals would have incurred more than $74 million in associated fees.) Payments made through blockchain do incur fees as well, but these costs are significantly lower, often reduced by about 75% compared to traditional providers.
Awareness and proactive participation in technology are essential. While many individuals are still grasping the beneficial social implications of blockchain—in areas such as combatting unfair practices like redlining—nations like China and the European Union have already initiated discussions to assert their dominance in this arena.
Creating a system to accept cryptocurrency donations reflects a dedication to innovation and acknowledges the expanding role of cryptocurrency in the economic landscape, national security, and the leadership of the United States.
The National Republican Campaign Committee (NRCC) has expressed its intention to accept crypto contributions. The NRCC is chaired by Rep. Tom Emmer (R-Minn.), a leader of the Congressional Blockchain Caucus. Additionally, other Congress members, like Rep. Darren Soto (D-Florida), who co-chairs the Congressional Blockchain Caucus, have set up channels for receiving crypto donations.
Two distinct initiatives, both launched in 2020, aim to empower congressional members to receive donations in cryptocurrency: one is centered around the donors encouraging the crypto community to contribute in traditional currencies (U.S. dollars) called HODLpac, while the second is campaign-focused, Crypto For Congress, dedicated to educating campaigns on accepting crypto donations.
I. HODLpac for Donors
HODLpac functions as a political action committee (PAC)—a collective that gathers funds and contributes to candidates for public office.
Registered with the Federal Election Commission (FEC), HODLpac is unique in that it is governed by its community: contributors determine whom to support.
Its mission is to endorse candidates for the House of Representatives and Senate that advocate for the advancement of cryptocurrencies and a decentralized economy within the United States.
As a community-led PAC, contributors in 2020 voted on which candidates to back using their governance token, HODLvotes.
For the upcoming 2022 election cycle, HODLpac is developing a new initiative. They are introducing a quadratic funding application aimed at enhancing political contributions from the crypto community while laying the foundation for HODLpac to evolve into a decentralized autonomous organization (DAO).
Beginning late 2021, HODLpac will launch a platform allowing members of the crypto community to make direct donations to any candidate they choose during live “Donation Rounds.
During the Donation Rounds, individual contributions will be matched based on a quadratic funding algorithm, with funds donated directly to HODLpac acting as the matching pool. It’s similar to Gitcoin Grants, but focused on politics.
When contributors participate in Donation Rounds, three key actions occur:
- These contributions will count against an individual’s contribution limits to each candidate. The Federal Elections Committee (FEC) caps individual donations at $2,900 per election. Primary, general, and runoff elections (if applicable) each qualify as distinct elections for donation limits. HODLpac will administer active Donation Rounds during the primaries, general elections, and runoffs if relevant.
- HODLpac will match donations from contributors. HODLpac itself will also be raising funds from the crypto community. Money raised by HODLpac will serve as the matching pool, amplifying donations made by individuals. More details on the benefits of quadratic funding can be found at wtfisqf.com.
- Contributors will receive HODLvote tokens, HODLpac’s governance token. Participants in HODLpac Donation Rounds will acquire HODLvote tokens, utilized for community governance purposes. For more details, see the Community Governance page.
Greater Impact. HODLpac can enhance the financial contributions to deserving candidates through this structured approach. By integrating “earmarked donations” with a quadratic funding matching pool, they can significantly boost the total funds accessible for candidates. Candidates can receive up to $2,900 from each individual donor in an election cycle, alongside the maximum $5,000 contribution from HODLpac per cycle (not just $5,000 from HODLpac alone).
Avoiding Partisanship. HODLpac is a nonpartisan PAC, having contributed to 5 Republicans and 5 Democrats in 2020 based on community voting. However, they noticed that most community members voted along party lines during the 2020 electoral cycle when determining HODLpac’s endorsements. The new quadratic funding model aims to diminish this issue by allowing contributors to donate solely to candidates they personally support, with funds amplified by the matching pool. Additionally, HODLpac plans to implement separate matching pools for each political party, enabling donors to decide their support for specific parties.
Progressive Decentralization. Gitcoin DAO has established a roadmap for HODLpac’s own gradual decentralization. Contributors to HODLpac’s matching pool and participants in donation rounds will receive governance tokens to help guide the organization’s future direction, including setting matching pool amounts in subsequent rounds or determining the allocation for independent expenditure funds from the Super PAC.
II. Crypto for Congress
Now is the time for all Members of Congress to understand and adopt cryptocurrencies and blockchain technology; the most effective way to achieve this is to establish a digital wallet and embark on the blockchain exploration. Numerous countries such as China, Japan, Singapore, and Switzerland are quickly adopting blockchain technology and crafting comprehensive national strategies to lead the global landscape. The U.S. is lagging in technological advancements, which presents a risk we cannot afford to take.
Perianne Boring, Founder and President of the Chamber of Digital Commerce.
The Digital Chamber of Commerce has developed a comprehensive, step-by-step guide for Congress members on how to accept crypto donations, which is available at cryptoforcongress.com.
The Crypto for Congress initiative receives backing from members of the Congressional Blockchain Caucus, including pro-cryptocurrency Representatives Darren Soto and Tom Emmer.
The moment of realization is now. Crypto for Congress presents an opportunity for our entire Congressional community to engage with this transformative shift in finance and technology. By embracing the digital asset movement, we have a chance to make significant strides in preserving America’s leadership in the global economy.
U.S. Rep. Tom Emmer
The Crypto for Congress initiative is backed by a consortium of leading firms in the digital asset space, such as Anchorage, Armanino, BitPay, BlockFi, Bloq, CMT Digital, Circle, Civic, Core Scientific, eToro, Flipside Crypto, Hedera Hashgraph, Medici Ventures, Messari, and Paxos.
This resource encompasses the following aspects:
- What are cryptocurrencies and blockchain?
- The rationale behind accepting crypto donations.
- A step-by-step guide on setting up crypto donations.
- FAQs from the FEC for campaign committees.
- A small Bitcoin donation to initiate the process.
As legislators, it is our obligation to ensure that the United States remains at the forefront of blockchain technology. Gaining hands-on experience with this technology is a crucial step in fostering innovation and maximizing the potential benefits of cryptocurrencies for the U.S. economy.
U.S. Rep. Darren Soto
1. What are cryptocurrencies and blockchain?
Cryptocurrency refers to a collection of technologies utilized to digitally store and exchange assets in the form of coins or tokens. The operational mechanics of cryptocurrency are decentralized (unlike centralized digital currencies that are emerging), and its security is fortified by cryptography (encryption), which ensures both safety and anonymity. Though Bitcoin holds the status of being the most recognized cryptocurrency globally, the marketplace now features thousands of cryptocurrencies, as listed on the price tracker coinmarketcap.com. Non-Bitcoin cryptocurrencies are generally termed as “Altcoins.”
Cryptocurrencies represent decentralized, digital currency that is traded on networks known as blockchains.
Bitcoin is the most widely recognized cryptocurrency; however, there are thousands of “altcoins.”
Validation of trading transactions is executed by crypto “miners,” who receive a fee in cryptocurrency for their services.
Significant institutions are now investing considerable amounts as part of their investment portfolios.
Innovative investment vehicles have been created allowing investors to acquire products that mirror cryptocurrency value without directly owning the cryptocurrency.
Cryptocurrency values can be highly volatile. Effective education and risk awareness are paramount for crypto investors.
A blockchain should be viewed as a global, transparent ledger that serves as a shared database where numerous digital coins are attributed to individuals, secured by their unique encryption keys. People can verify their ownership or validate the transfer of their coins via their individual unique key (private key).
What prompted the establishment of such a unique exchange system? Cryptocurrencies were intentionally engineered to operate independently of central authority or government regulation. This independence arises from the decentralized character of blockchains. Anyone can interact with a public blockchain network, viewing transactions or participating in its operations, arguably making it one of the most significant disruptive technologies following the advent of the internet.
A public blockchain maintains operations across numerous computers simultaneously (it is “distributed”). It permanently records transactions publicly as they take place. Given that no single person or entity oversees a distributed network, there’s no central entity regulating or shutting it down. This enables individuals to directly buy, sell, or send cryptocurrency to one another without any intermediary such as a bank. However, just because each transaction is publicly visible doesn’t mean the identity of the transactors is revealed; the blockchain only displays the wallet addresses involved, not the owners of those wallets.
When a new transaction is processed, various “miners” (independent participants operating computer nodes) undertake a technical verification, earning a cryptocurrency transaction fee for these efforts. Each validation is then confirmed by other nodes, achieving “consensus,” after which the transactions are irreversibly recorded onto the public blockchain. The risks of fraud are significantly reduced, if not eliminated, because it would be highly challenging to orchestrate a false validation with thousands of miners across different countries. Miners are incentivized financially to ensure the blockchain remains trustworthy and accurate.
2. Why it makes sense to accept crypto donations
Accepting cryptocurrency contributions provides campaigns with an additional avenue to connect with essential demographics, stimulate political involvement, and tap into a previously unexploited source of funds. During the 2018 election cycle, political contributions reached $5.7 billion, with two-thirds stemming from individual contributions—equating to $3.7 billion from personal donors. A substantial portion of this increase can be attributed to the emergence of online donation processors and the enhanced ability to engage new audiences online.
Boosting Political Engagement with Key Demographics. A survey revealed that 49% of Generation Z and 41% of millennials intend to donate to a political campaign in 2020. To engage younger voters in the political sphere, it’s crucial to utilize their preferred means of communication. Similar to how campaigns employ social media for targeting various demographics, they also need to cater to diverse payment preferences. Think about the implications if you restricted direct mail donors to credit card payments only or mandated supporters over the phone to go online. If contributors can’t give in their preferred manner, chances are they won’t engage.
Permitting supporters to contribute in cryptocurrency demonstrates to crypto holders that your campaign embraces forward-thinking ideas, innovation, and is in tune with contemporary trends.
Blockchain Transactions are More Cost-Effective, Rapid, and Secure. Emerging and competitive transaction processors within the cryptocurrency sector charge significantly less—usually up to 75% less—than their traditional counterparts, enabling campaigns that accept crypto to retain a larger proportion of their contributions, receive funds more swiftly, and process them with greater security.
Exemplifying Leadership in Innovation. Blockchain technology presents diverse opportunities for businesses, governments, and consumers. Its unique attributes can drive substantial economic growth and enhance internet security. By improving cost-effectiveness and ensuring transparency, blockchain is altering conventional business methods. For instance, blockchain can offer services to those who currently lack access—particularly the unbanked and underbanked—by streamlining remittances and providing digital identity solutions. Its influence is also manifesting across industries far beyond financial services, encompassing healthcare, supply chain management, energy, transportation, and insurance.
To maintain its technological prominence globally, the U.S. must be at the forefront of cutting-edge technologies. Blockchain represents the financial foundation of the impending digital economy. Nations like China and the European Union are cognizant of this and are establishing strategic frameworks to lead in blockchain technology development.
Welcoming cryptocurrency acceptance is a transparent commitment to innovation, recognizing its significant potential to influence the economy, national security, and American influence.
3. Step by step guide on how to set up crypto donations
The Chamber of Digital Commerce has designed a toolkit to assist campaigns in initiating crypto contributions and leveraging blockchain technology to enhance political participation. You can download it here.
4. FEC FAQ for Campaign committees
The Chamber of Digital Commerce is committed to providing resources regarding campaign finance best practices concerning the acceptance and management of cryptocurrency contributions. Below is a selection of FAQs that campaigns may encounter—click here to access the FEC FAQs, featuring:
- What is the FEC Guidance on Reporting Cryptocurrency Contributions?
- What Information is Required from Contributors?
- What are the Legal Limits for Cryptocurrency Contributions?
- Do Committees Must Record Exchange Fees?
- How Do Committees Handle Fraud Protection?
- What Happens if a Committee Needs to Refund an Excess or Unwanted Contribution? What is the Refund Process?
- Should Committees Liquidate (Sell) Contributed Cryptocurrencies Immediately? Should They Hold or Liquidate (Sell) Their Cryptocurrency Contributions?
- How Should a Committee Document Cryptocurrency Contributions?
- Can a Committee Use Cryptocurrency for Operational Expenses?
- How Can Committees Avoid Breaching Campaign Finance Limits with Cryptocurrency Price Fluctuations?
- How to Evaluate the Value of a Cryptocurrency Contribution?
- Are Committees Required to Report Gains in Value for Tax Purposes on Cryptocurrency Holdings?
5. A small Bitcoin donation to get the ball rolling
In October 2020, all Members of the U.S. Congress received a campaign contribution in bitcoin through a pioneering initiative dubbed “Crypto for Congress.” This event represented the first instance where each Congress Member had the chance to engage with and comprehend the potential of blockchain technology fully.
Similar to other technologies, the most profound learning occurs via hands-on engagement. In addition to the $50 bitcoin donation from the Chamber of Digital Commerce PAC, extensive public online educational training, toolkits, and resources will be provided to Members across all parties to educate them about cryptocurrency.
Crypto for Congress marks a critical turning point, comparable to when Members of Congress began utilizing email or tweeting. It aims to foster a deeper comprehension of the vast capabilities of this technology, promoting increased political engagement as well as the potential to disrupt various sectors of the economy.
About the Chamber of Digital Commerce
The Chamber is recognized as the largest blockchain trade association globally. Our mission encompasses promoting the acceptance and application of digital assets and blockchain technology, supported by a diverse membership that reflects the global blockchain industry. Through educational efforts, advocacy, and collaboration with policymakers, regulatory bodies, and industry actors across various jurisdictions, our aim is to establish a pro-innovation legal framework that encourages growth, job creation, and investment. Visit www.digitalchamber.org for more information.
Contact Information:
Chamber of Digital Commerce 1667 K Street, NW, Suite 640 Washington, DC 20006
info@digitalchamber.org
202.765.3105
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