As background, digital currency (or cryptocurrency) has been used at the federal level since 2014, when the FCC issued an advisory opinion on the use of Bitcoin for campaign contributions. It concluded that the requestor may accept bitcoin contributions as proposed in its advisory opinion request and may purchase bitcoins with funds from its campaign depository for investment purposes, but "may not make disbursements using those purchased bitcoins because Commission regulations require the committee’s funds to be returned to a campaign depository before they are used to make disbursements." So in short, you can accept bitcoin as a campaign donation, but have to turn it into cash before depositing it.

More recently, this past summer the National Republican Congressional Committee, the financing arm for House Republicans, become the first national party committee to begin accepting cryptocurrency for campaign contributions. The NRCC accepts cryptocurrency contributions using payment service Bitpay, and then converts the donations into dollars prior to landing in the organization's account.

In Texas, the use of cryptocurrency is currently under consideration at the Commission. The Commission discussed a new proposed rule (§22.37. Cryptocurrency Contributions) at its September 1, 2021 meeting, which set out the circumstances under which candidates, officeholders, political committees and legislative caucuses may accept cryptocurrency contributions.

The rule was then published on the Texas Register for public comment. The basic outline of the rule includes:

  • Candidates, officeholders, political committees, and legislative caucuses may accept cryptocurrency contributions.
  • Cryptocurrency contributions are considered “in-kind” contributions, rather than monetary contributions.
  • Those who accept cryptocurrency contributions must obtain certain information before accepting the contribution to ensure it's a legal contribution.
  • The recipient must to sell the cryptocurrency and deposit the proceeds from the sale into an account before making an expenditure from a cryptocurrency contribution.
  • The value of a cryptocurrency contribution is the fair market value of the cryptocurrency upon receipt. 

The Commission took up this rule again at its December 9 meeting. After a lengthy discussion (45 minutes) the Commission voted to republish the rule with two amendments - based on public comments:

  • Delete Subsection C, which is the section that requires the cryptocurrency to be converted to cash prior to being used. The Commission General Counsel agreed with public comment that there doesn’t appear to be legal support for a prohibition on using cryptocurrency directly to buy goods and services since the Texas Election Code allows expenditures to be made with money or "any other thing of value".
  • Change "cryptocurrency" to "virtual currency", to be consistent with language used in HB 1576 and HB 4474, legislation passed during the 87th Legislative Session.

We are also hosting our first "Nerdy for 30" event in January on this issue. Stay tuned for more details.