Jets can’t get off the ground without jet fuel. Likewise, political campaigns can’t get off the ground without their own brand of fuel: money.
In a new partnership, fintech startup CipherTrace has joined forces with govtech startup Schweitzer Laboratories to enable political action committees (PACs) to safely accept virtual money, otherwise known as cryptocurrency. This adds to existing methods for PACs to raise money, such as ACH, credit cards, debit cards and wire transfers, for political candidates and causes.
The CipherTrace-Schweitzer Labs technology pairing screens a PAC’s digital wallet to ensure various standards are met before a cryptocurrency contribution is actually deposited.
Most campaign finance regulators, including the Federal Election Commission, already allow crypto-donations. Out of the $14 billion raised in the 2020 federal election cycle, crypto accounted for less than 1% of donations during that cycle, according to Schweitzer Labs.
Will Schweitzer, founder and CEO of New York City-based R&D company Schweitzer Labs, told FinLedger that coupling CipherTrace’s “know your transaction” software with his company’s blockchain-based 4US campaign finance platform will let PACs confidently accept cryptocurrency without running afoul of campaign finance laws. At the same time, PACs can minimize reputational risk.
Just as 4US automates compliance for a PAC’s cash transactions, the 4US-CipherTrace combo paves the way for a PAC to take cryptocurrency in a simple, legal manner, Schweitzer explained.
“Many organizations have been hesitant to jump into crypto because of fear of receiving assets that are tied to criminal or completely anonymous enterprises,” he said.
Schweitzer believes we’re on the cusp of cryptocurrency being widely accepted by PACs and political campaigns.
“As regulation around crypto comes into focus and its popularity continues to grow, it’s inevitable crypto will be a commonly accepted part of everyday life — including in political finance,” he said. “However, it’s important to understand that blockchain is transforming payments overall, and what we think of as crypto today will transform into normalized payment protocols — especially in highly regulated industries like campaign finance.”
One high-profile proponent of crypto-donations in politics is Andrew Yang, a Democratic candidate for president in 2020 and a current candidate for mayor of New York City. In 2019, a PAC supporting Yang’s presidential bid took contributions in the form of cryptocurrency.
“Embracing cryptocurrency signals to those who hold it that your campaign is open-minded, forward-thinking, and up to speed on how consumers are transacting in their daily lives,” Perianne Boring, founder and chairwoman of the Chamber of Digital Commerce, told The Palm Beach Post in 2020. “It also demonstrates a strong commitment to innovation and its impact on the economy, national security and American leadership.”
Not everyone is a fan of crypto-contributions in politics, however. Daniel Weiner, deputy director of election reform at the Brennan Center for Justice, told The Palm Beach Post he views cryptocurrency in politics “as more of a gimmick.” He complained that cryptocurrency “is essentially designed for anonymity,” which is antithetical to the openness that should be a critical component of campaign contributions.
Schweitzer Labs’ 4US is a nonpartisan, real-time automation platform for campaign finance compliance used by PACs, nonprofits and campaign finance regulators.
Menlo Park, California-based CipherTrace develops technology that aims to prevent fraud, theft and money laundering in the cryptocurrency space.