CHICAGO — Cryptocurrency’s march toward the mainstream has already captured coffee shops, software makers and online retailers, but this week it ventured into unusual territory — campaign contributions.
Lake County Treasurer Holly Kim, a Democrat who is running for reelection next year, became one of the first Illinois political candidates to accept digital currency when a supporter gave her a $3 donation in Litecoin, with the promise of more to come later.
It’s a novel and potentially lucrative fundraising technique — Dogecoin, one form of crypto Kim accepts, has seen its value increase 100-fold over the past year — and Kim said it’s a way to connect with tech-savvy people who might be new to political donations.
“It seems to be how people want to give,” she said. “I feel like it’s a new frontier.”
The Federal Election Commission has allowed crypto donations since 2014, but so far few politicians have taken advantage of that (Andrew Yang, the entrepreneur and Democratic presidential candidate, has been a notable exception).
Illinois candidates, despite living in a state with a burgeoning crypto scene, have been as reticent as anyone. Matt Dietrich, spokesman for the Illinois State Board of Elections, said the first might have been Aaron Merreighn, a Conservative Party candidate for lieutenant governor who, records show, received a Bitcoin contribution in 2018.
Rick Crosley, a DuPage County-based political consultant who was the treasurer on that campaign, said the contribution had an initial value of about $600 but quickly doubled. It was never spent, and was returned to the donor at the campaign’s conclusion, he said.
Crosley said crypto has several advantages he believes will soon bring it in the political mainstream: It doesn’t filter through banks or credit card companies that might have issues with a candidate’s positions, it can serve as collateral for loans, and crypto-based transactions can be done fast and at minimal cost.
“The speed and efficiency of this financial instrument will allow a candidate to do much more,” he said.
Kim, 40, has been interested in cryptocurrency for years. As a trustee in Mundelein, she said, she tried to convince her colleagues on the board to find a payment processor for the village that would accept Bitcoin or PayPal along with Mastercard and Visa. They declined.
“At that point, I accepted it might be too future-minded,” she said.
But she said she saw its potential anew in recent months as the list of businesses that accept the currencies grew to include lender United Wholesale Mortgage and movie theater chain AMC. She consulted with the election board and created a website that includes an option for crypto donations.
Her campaign accepts the most popular cybercurrencies, including Bitcoin, Dogecoin, Litecoin and Ethereum, along with more obscure forms such as Bitcoin Cash and Dai. The election board is treating them as if they’re in-kind donations of corporate stock, rather than cash.
Their value, for the purpose of staying within campaign contribution limits, is established in dollars on the day they’re donated, Dietrich said. But cryptocurrencies are a notoriously volatile financial instrument, and in a short amount of time that value could blow through the roof or plunge like a wounded sparrow.
Like many crypto true believers, Kim said she plans to hold onto those donations in the expectation they will rise in value, though she added that “if worse comes to worst, we can always convert it (to dollars).”
Her initial cryptocurrency donation came from Mark Tan, founder of Lake Forest-based investment management firm T Capital Coin. His tiny contribution — a fraction of a single Litecoin — was meant as a test to make sure the donation system works as planned, he said.
He said political campaigns that accept cryptocurrencies could find a new class of donors eager to participate.
“I believe you’ll probably find crypto enthusiasts will support candidacies of government officials who see the potential of blockchain technology as something that’s moving forward,” Tan said. “(Those donors) are more supportive and open-minded.”
Some campaign finance watchdogs are troubled by the advance of crypto into politics, given the anonymous nature that has made it popular with hackers and drug dealers. But the vaunted secrecy of the currencies might not be as ironclad as once assumed: Earlier this summer, the FBI was able to recover $2.3 million in Bitcoin paid out in the Colonial Pipeline ransomware attack.
Those who make crypto donations to candidates have to identify themselves and list their address and occupation, just as with traditional contributions. Kim said that kind of openness might be an adjustment for some Bitcoin fans, who are accustomed to nameless transactions.
“Since we’re trailblazing here, I want to be sure we’re good ambassadors,” she said. “This could reflect how crypto donations are received in the future, so we want to be sure we do everything right.”
Dietrich said the election board can investigate if it believes crypto donations are being used to subvert reporting requirements, but Kent Redfield, a campaign finance expert and professor emeritus of political science at the University of Illinois at Springfield, doesn’t see cryptocurrency changing much about political donations in the state. The rules, he said, already allow a level of opaqueness.
He said people can shield their identities by donating to nonprofit organizations that then contribute to political action committees or “independent expenditure committees,” more commonly known as super PACs.
“Does (cryptocurrency) add another layer of uncertainty about where money comes from? I think that’s probably fair,” Redfield said. “But it just joins a lot of other dark money and semidark money that flows into the system.”