With just months to go before the next election, the agency tasked with policing the federal political fundraising is polling the parties on how to deal with contributions made via Bitcoin and other cryptocurrency platforms.
In a notice posted online earlier this week, Elections Canada notes that “with interest in cryptocurrency on the rise, political entities have requested guidance on accepting contributions and conducting other transactions in bitcoin or altcoins.” It’s a trend that has already triggered the agency to release a draft interpretation note on how such transactions should be handled.
Parties have until January 21 to submit their views on the issue, which will be added to the registry and may or may not result in changes being made to the final version of the note.
For its part, the draft note provided by Elections Canada takes the position that cryptocurrency donations are non-monetary, in-kind contributions.
“Cryptocurrencies have traits of both money and property,” the note points out.
“Like money, they can be used to make purchases from businesses that choose to accept them. But unlike money, they cannot be placed directly into a bank account. Instead cryptocurrencies can be sold for traditional currencies that can be placed into a bank account.”
According to Elections Canada, that makes cryptocurrencies “more like stocks or bonds,” which, it notes, “are a form of ‘property’ and fall under the definition of a non-monetary contribution.”
As the note points out, that’s similar to the positions taken by both Elections BC and the U.S. Federal Election Commission, as well as the Canada Revenue Agency, which treats it as a commodity. Elections Ontario, though, considers such transactions to be no different from a contribution made by cheque or credit card.
Under that designation, parties would be free to accept these offerings, but would have to follow the same rules that apply to all non-monetary contributions, which are subject to virtually all the same rules and limitations as monetary contributions, including the annual cap, but aren’t eligible for tax receipts.
It would also be up to the party to keep a running tally of the equivalent value of all cybercurrency donations to ensure that no single donor exceeds the annual limit — which, the note suggests, would use either the exchange rate used during the initial transaction, or a “reasonable rate on a major exchange platform” to estimate the price at the time of the donation.
Perhaps more crucially, the onus would also be on the party to establish — and confirm — the identity of anyone who donates more than $20, and comply with all relevant requirements for reporting that information to Elections Canada. The agency warns the parties that this could be trickier than it sounds, given that a “salient feature” of cryptocurrency is anonymity.
“Cryptocurrencies are generally sent and received between digital wallets using public keys, which are translated (“hashed”) into addresses and appear on the blockchain ledger as a string of letters and numbers,” reads the note.
“While all transactions are recorded publicly, there would be no way to tell if the same person was contributing multiple times to the same or affiliated entities, since the addresses could change every time.”
It also points out that “most cryptocurrencies are received passively,” which means that a party or candidate “cannot stop someone from transferring coins to their wallet,” despite the current laws barring anonymous donations of more than $20.
“Anonymous contributions of cryptocurrency over $20 have to be remitted to Elections Canada without delay, by sending a cheque payable to the Receiver General for Canada for the commercial value of the contribution at the time it was received.”
Finally, the note states that Elections Canada “may ask a political entity to submit the transaction history of its digital wallet as a supporting document, in the same way that it might request a bank statement.”
So, how are Canada’s political parties reacting to the agency’s bid to establish new protocols for managing their virtual coffers?
A quick check of their respective websites suggests that, at the moment, it’s still very much a hypothetical question: Not one of the major parties currently offers supporters the option to donate via cryptocurrency.
Even so, Liberal spokesman Braeden Caley told iPolitics that the party is “closely following” Elections Canada’s consultations.
“Our focus is on ensuring that political contributions are transparent and fully compliant with the Canada Elections Act,” he noted.
“It’s important to the Liberal Party (and for compliance with Elections Canada rules and regulations) that the name and address of each donor is clearly indicated for political contributions.”
That, he added, is why they also require contributors to affirm that they’re either a Canadian citizen or permanent resident — and, as such, eligible to donate — whose contribution is being made from their own personal funds, and not a corporate or business account, with no reimbursement expected.
As yet, none of the other parties have responded to iPolitics’ query — if and when they do, this post will be updated, and once the consultations wrap up, we can also look forward to perusing the full archive of written submissions received by Elections Canada.
*This post is credited to iPolitics Canada