In Accepting Bitcoin, Rand Paul Raises Money and Questions

WASHINGTON — Presidential fund-raising, never known for its transparency, may have just become even more secretive.

In announcing his candidacy for president this week, Senator Rand Paul of Kentucky waded into new waters when he said he would accept campaign contributions in Bitcoins, a largely untraceable virtual currency, in amounts up to $100.

Interested donors at were given three options for making a contribution: a credit card, PayPal or Bitcoins. While some state and federal candidates in California, Colorado, New Hampshire and elsewhere have started accepting Bitcoins, Mr. Paul, a Republican, is the first presidential candidate to do so.

The novelty of the payment method is likely to help Mr. Paul highlight his edgy appeal to other libertarians, tech-savvy voters, young people and others who favor Bitcoins. But it also raises questions about whether illegal contributions could make their way into campaigns more easily.

The Bitcoin itself is essentially untraceable if the owner wants to maintain anonymity, and political candidates who accept them must rely largely on donors’ disclosing their identity.

Federal law bans contributions to individual candidates from foreigners, corporations or straw donors, among other restrictions, and campaigns are expected to make their “best efforts” to collect and publicly identify donors who contribute more than $200 in a year and to detect contributions that may be illegal.

“At some level, we are trusting candidates,” said Richard L. Hasen, a campaign finance expert at the University of California, Irvine, School of Law. The system already relies on some measure of trust from candidates, he said, “but the difference with Bitcoin is that it is inherently untraceable.”

In a ruling last year, the Federal Election Commission agreed to allow a political action committee to accept Bitcoins with a voluntary limit of $100, but the commissioners split over how the online currency — which can fluctuate widely in value — should be treated on a broader scale or whether it should be capped.

“Bitcoins are no more anonymous than any other contribution,” wrote Lee E. Goodman, a Republican commissioner who was then the chairman of the panel. He said that technological innovations should be embraced in the political system and that Bitcoins should be treated no differently than a computer, securities, a painting or other legal, “in-kind” contributions.

But the three Democratic commissioners — Ann M. Ravel, Steven T. Walther and Ellen L. Weintraub — were much more cautious in endorsing the limited use of Bitcoins.

Bitcoins should be treated the same as cash, with a cap of $100, to protect against unethical and illegal activities, the three commissioners wrote. “The fact that Bitcoins are ultimately untraceable makes prophylactic measures at the outset of the transaction particularly important,” they said. The commission did not adopt the cap.

For Mr. Paul, who has been sharply critical of the government’s electronic surveillance programs as an attack on privacy, his embrace of Bitcoins — with their added layers of privacy — is a way to establish his bona fides with younger voters who put a premium on Internet freedom and technology.

“Senator Paul will run the most tech-innovative campaign in 2016,” a spokesman, Sergio Gor, said when asked about the decision to accept the digital currency. “From Snapchat to Bitcoin, we’ll engage in various forums before anyone else.”

“This is certainly new territory,” said David Mitrani, a Washington lawyer who specializes in campaign finance law and has represented several candidates who have accepted Bitcoins.

“It is traceable, but only if the campaign follows the strict instructions that were given by the commission” for identifying the donor, he said. “If a committee doesn’t implement these strict measures, there’s certainly a concern.”

As an experiment, Mr. Mitrani tried to make an online donation of more than $200 in Bitcoins on Mr. Paul’s campaign website — above the voluntary limit that his campaign placed on Bitcoin donations.

The donation was rejected. “Bitcoin donations are limited to $100,” the automated response said. “If you would like to contribute more than $100, you may select Credit Card as your payment option and contribute up to $2,600 for the primary election and up to $2,600 for the general election.”

Representative Jared Polis, Democrat of Colorado, became the first member of Congress to accept Bitcoins as donations last year.

Mr. Polis said he collected $1,986 in Bitcoins, a tiny fraction of the nearly $1.2 million he raised over all in his 2014 re-election. He said Bitcoins were not only a way to give people another way to donate, but also to show his support for Internet freedom, a cause he has championed.

“It’s no riskier than any other kind of contribution,” he said.

Bitcoin enthusiasts predicted that Mr. Paul would be the first of many presidential candidates to rake in Bitcoins.

“He’s at the forefront of a tech revolution, like the first candidates to have websites,” said Brian Klein, a Los Angeles lawyer and a Bitcoin supporter who has represented many clients involved in the currency.

“I bet other presidential candidates will follow his lead, and soon,” Mr. Klein said. “I also believe in a year or two, this won’t be a story because every candidate will accept Bitcoins — just like every candidate has a website.”

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