Earlier this week, Rand Paul became the first major U.S. presidential candidate to officially accept Bitcoin donations. As I mentioned in my article at the time, it is seemingly a perfect fit. Bitcoin is full of libertarians and Paul is more or less a libertarian masquerading as a Republican.
The Washington Post called it a “genius” political move and correctly pointed out that it is a part of a larger plan to appeal to tech-savvy and young voters. Indeed, Paul is taking the social media engagement one step further (and younger) than his opponents, by offering “behind-the-scenes” looks at the campaign on Snapchat.
In my article, I mentioned how Rand’s father Ron Paul pioneered the act of raising money on the Internet in 2007 when his online supporters, working independently from the campaign, dropped US$4.2 million into his coffers. John Kerry and Howard Dean both raised significant amounts of cash online in 2004 (which actually helped close the funding gap between Kerry and Bush), and way back in 1998, former Minnesota Governor Jesse Ventura was the first to show that the Internet could be used to circumvent major donors in politics.
But it was the elder Paul who showed that the Internet could be used to lift up an outsider in a presidential election. (Kerry and Dean can't be called outsiders, and Ventura's race was a gubernatorial one.) It should be noted that people who were born during that Ventura campaign will be voting for president for the first time in 2016.
Rand Paul is hoping that Bitcoin will be his version of Internet donations, providing the unexpected advantage that can rise out of new technology. Some fear, however, that the pseudonymous nature of Bitcoin could be used to hurt Paul in the primaries or the general election (if he gets that far). There are strict rules on who political candidates can take money from during a campaign, and foreign nationals without legal resident status in the United States are one group that is officially restricted from donating. This point was quickly brought up on Reddit by various users, one who mentioned that he was able to donate to the Paul campaign by generating a fake United States address.
While I would discourage foreign nationals from attempting to donate to the Paul campaign, I do not think this will become an issue. If it does, it will only be a passing controversy. The United States has a political history of attacking an opponent's campaign contributors. They tend to focus on unsavory donors, usually those with a racist or criminal past, but such attacks rarely sway an election.
A quick note for anyone who thinks Bitcoin donations will harm campaign financing: While it appears easy enough to get past Paul campaign's filter, there is already an open avenue for unsavory types and foreign nationals who want to contribute to an American political campaign. SuperPACs rose to prominence after the Citizens United case destroyed any semblance of campaign finance regulation. Anyone can donate any amount of money to any candidate, anonymously, through the use of SuperPACs. Transparency in federal elections is a boat that has long since sailed, and very few in Washington seem serious about rectifying the situation. Bitcoin won't change that either way.
Shady characters can already donate to Paul, or any other political campaign. No Bitcoin is needed and no paper trail is required. Simply hand your donation to a SuperPAC that supports the campaign of choice. Most who are politically savvy already know that. The question is: Could someone intentionally sabotage Paul by pretending to be an unsavory donor using Bitcoin?
Perhaps, but it won't matter in the long run. Presidential political campaigns get extremely competitive and dirty, so I wouldn't put it past any of Paul's potential opponents to try, but it would be one of their least effective tactics. There are two ways they could go about this. Either make a donation in the name of an unpopular group – like the KKK – or have foreign nationals donate from out of the country while claiming to be American.
The KKK theory holds no water. That could always be accomplished with traditional donations. Campaigns simply have to watch out for and return any donations taken from an disreputable source. They happen all the time in elections and are usually a minor controversy, good for a few points in the polls for a few days, but not much more. Undesirable donations are always a risk, but that risk is in no way unique to Bitcoin. The foreign national theory seems more reasonable, but this also falls apart when put under scrutiny.
Unlike traditional non-SuperPAC donations, which would likely be tied to a bank account, Paul has a level of plausible deniability. The law only stipulates that the Paul campaign has to make a reasonable attempt at determining the donor's legitimacy. If the donation does not actually come from the person who claims to offer it, Paul can simply say he didn't know, and there would be no reason to doubt him. Bitcoin doesn't differentiate nationality, so how could a bitcoin-accepting campaign?
Essentially, the situation would be the same as a foreign national coming to the United States and managing to open a bank account without a green card (foreign nationals with a green card can legally donate to campaigns), then using that bank account to fraudulently donate to Paul. In such a scenario, voters would be unlikely to hold it against the Paul campaign, especially if the money were returned as soon as the donation became public. With Bitcoin, it is much easier for anyone to donate to the Paul campaign, even those who aren't supposed to, but that doesn't change the Paul campaign's guilt in the situation.
Attacking Paul on bitcoin donations would require his opponents to educate the American public on what Bitcoin is, and then convince them bitcoin donations are more dangerous than regular donations. That isn't going to be an easy task, even with political attack ads running around the clock.
There are far more useful avenues to attack Rand Paul. During the primary, expect his opponents to focus on his foreign policy. While libertarians and liberals alike tend to favor Paul's isolationist views, the GOP base skews heavily towards the neocon or Project for a New American Century view. Opponents will try to marginalize him in the debates by painting him as a weak, quasi-liberal wacko. If they succeed, there won't be any need to attack Rand on anything else. If that approach doesn't resonate, well, they will probably continue to attack Paul on those same issues anyway. Neoconservatives are not known for their ability to change the course when things go awry.
If Paul makes it to the general election, Hilary Clinton (or whomever the Democrats put forward) would anger the tech-savvy, younger voters who make up the Democratic base if she attacked the new technology and thereby sided with banks. The Democrats will get far more mileage by attacking Rand on his social and environmental views, where they can really differentiate themselves without angering their voter base.
This explains why it doesn't make sense to attack Paul's bitcoin donations within the context of a competitive campaign. But there is a bigger reason why both Republican and Democrat politicians will likely avoid the issue: they love money. If the Paul campaign rakes in significant numbers, other politicians will want to get on the gravy train, not force it to a halt. Money speaks in Washington, and you can bet every politician is watching how Paul's bitcoin fundraising does. If he pulls in numbers like his dad did in 2007, there will be a few other major candidates trying to catch the same lightening in a bottle.
If his opponents attack Paul on Bitcoin by bringing up every little donation that may have come from outside the country, that could draw the ire of the Federal Election Commission (FEC). Then, the 2018 midterms or 2020 election could see more stringent Bitcoin donation regulations. They could, theoretically, outlaw Bitcoin donations that don't go through sites like Coinbase that verify user identities.
Few politicians want more regulation on whom they can accept donations from. The political elite have been working to destroy those barriers for decades. Only the incredibly stupid or desperate would try use Bitcoin to reverse that trend. It would ostracize them from the rest of their party, a segment of the voting youth and a segment of the anti-regulation crowd. Neither side has much to gain by attacking Paul on this issue, and I imagine politicians on both sides are excited by the idea of semi-anonymous bitcoin donations.
Even those who don't project to capture a large portion of the tech-savvy voting public will likely see the benefit in skipping merchant and credit card fees.
I could be wrong. It is only April 2015. There is a long election season ahead, with plenty of time for desperation and dirty tactics. If this happens, however, the Paul campaign will easily shrug it off. Other politicians, as well as politically active Bitcoin users, have far more to lose. If it happens, I think it will only happen once and the controversy will dissipate in a few days, as party leaders will put pressure on candidates to drop the issue.
Every politician running for president is desperate for money. Few, if any of them, care where that money comes from. They'll take Bitcoin or dollars or gold or stocks. Most of them would take yuan directly from a Chinese Communist Party bureaucrat if the FEC would let them and they thought it wouldn’t play badly on the nightly news.
It is far more likely that we will see other politicians getting in on the Bitcoin bandwagon. By 2020, I would be surprised if every serious candidate didn't have a Bitcoin donation option. Technology and the Internet have had a major effect on every national election this millennium. Those who took advantage early who saw the biggest gains. There is no reason to think this trend will not continue this election cycle.
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