Campaigns are unsure whether they should open their digital wallets for cryptocurrency donations. But, it is possible to get a warning from an unlikely source.
Ron Watkins, the man widely believed to have been the mastermind behind QAnon conspiracy theory and who is currently a Republican House candidate from Arizona, reported a 27 per cent loss on Bitcoin investments in his first six months of being a candidate.
Watkins, who is a crypto enthusiast, was sent a letter by the Federal Election Commission asking about his source of donations. He had already rectified the issue once. Although his fundraising was , it was still-a total of $51,000 for someone who once commanded an online army-the new modified filing submitted last week revealed tens and thousands in previously unreported donations.
Two Bitcoin gifts, totaling $1255, were among those donations previously not reported. The filing also stated that 27%, or about $342, of those donations had disappeared because of a crash in currency value.
The inherent volatility of the crypto market can cause additional headaches for the political world. The FEC, wary about the unregulated and murky cryptocurrency, continues to treat cryptocurrency as currency. Instead, cryptocurrency donations are reported as in kind contributions like a private aircraft or porn-star payoff. Donations exceeding $100 have not been officially approved, but they have not been officially capped.
The ‘in-kind” label adds another step to liquidation. The value of crypto gifts must be reported by political committees as the market value at the time they are received. However, they cannot just spend them. They must convert their Bitcoin into dollars first if they intend to use it.
Because cryptocurrency is more volatile than stocks and can take a lot longer to convert than donations, it can be a significant difference. This is what the Watkins campaign proved.
On Oct. 17, 2021 when Watkins filed for Congress, Bitcoin was worth $62,000. It reached its highest point of $68,000 a few weeks later. When the Watkins campaign evaluated its final holdings for the year, however, the crypto markets had experienced a series wild swings, crashes, and Bitcoin had dropped about 25%.
This means that if Watkins had kept a $100 Bitcoin donation from October, it would have been worth $75 by the end of 2018.
However, Watkins’ two Bitcoin donations were made just before a December flash crash that nearly 20 percent of Bitcoins’ market value. Watkins also announced a new Bitcoin campaign model. This involved a website that he said supporters might not be able find but ‘it’s real.
Watkins stated, “The point of all this is to prove that we can raise funds and win this,”
Although it is impossible to determine how many candidates have accepted Bitcoin, the reporting requirements are poorly understood. Experts agree that this number has risen over recent years. According to federal records, Watkins seems to be the only committee to have reported an itemized loss for its Bitcoin donations. This shows that even the largest backers of crypto in Congress don’t trust their investments to the market’s temper. They’re more likely to liquidate quickly than to hold on to hope that they’re carried to safety.
Blake Masters is a Republican far-right candidate for Senate in Arizona. He has been a vocal advocate for crypto since the beginning.
Masters, like Watkins went on a crypto fundraising spree during December. Masters instead of keeping the donations, Masters cashed them out as fast as possible, even though the market was so volatile, that even Masters lost value.
Masters offered his supporters the opportunity to purchase an NFT version, which he co-authored with Peter Thiel, his tech boss and billionaire backer. Masters created 99 NFTs digitized and unique collectible items that were tied to some cryptocurrency. They went up for $5800 per pop, which is the equivalent of a campaign donation. In three days, sold out, making the campaign nearly exactly $574,200. This is more than a third its fourth quarter receipts.
Or it should have made that much. An examination of Masters’ campaign filings shows that his committee received and transferred more $165,000 in cryptocurrency donations to cash in the three-day period. Over the next 36 hours, however, cryptocurrency markets crashed. Master more often than others cashed in donations under $5,800, with some even splits and sending $1.132 in processing fee to Coinbase.
While the Masters campaign has been accepting digital currency since September-which was around the time he suggested that the United States responds to China’s crackdown on crypto–he seems to have not received any crypto contributions until the NFT Blitz three months later.
The Masters and Watkins campaigns didn’t respond to our request for comment.
The trend is uncertain whether it will continue. Masters announced another round, with NFTs being sold in ‘packs of varying amounts at different prices. The campaign store doesn’t allow donors to link their crypto wallet automatically, unlike the initial round. It offers Apple Pay and credit card options. To donate crypto, supporters must first send an email or text message with a request.
Masters will have all the benefits of blockchain technology, but with the security of dollars, and the risk will be on Masters’ donor-investors.
He’s not the only one. Bloomberg reported earlier this month that crypto industry political donors still prefer dollars. Total crypto contributions are below $600,000. Masters’ haul is the largest by far.
Bloomberg reported that the main turnoffs are cumbersome reporting requirements, illiquidity, and the conversion requirement. The notoriously slow FEC will continue to make crypto more difficult than it’s worth, but younger candidates will undoubtedly continue to wear it as a cultural banner even if there is no return.
(The FEC seems to have gone one step further, and omitted the $100 limit from its candidate guide last.
The public won’t know if Watkins is still’hoDLing his Bitcoin before his next campaign finance report in April. After the last year’s crashes, including a flash crash in December that erased almost 20% Bitcoin’s value, Bitcoin has yet to break $50,000. It is currently almost exactly where it was on December 31, when he reported his unrealized loss.