ADVISORY OPINION 2022-01
SUBJECT: Contributions in the form of cryptocurrency
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We are writing in response to your request dated February 1, 2022, requesting an advisory opinion from the Iowa Ethics and Campaign Disclosure Board (IECDB) pursuant to Iowa Code chapter 68B.32A(12) and Iowa Administrative Code rule 351-1.2(1).
We note at the outset that the IECDB’s jurisdiction is limited to the application of Iowa Code chapters 68A, 68B, Iowa Code section 8.7, as well as rules in Iowa Administrative Code chapter 351. Advice in an IECDB opinion, if followed, constitutes a defense to a subsequent complaint based on the same facts and circumstances.
Cryptocurrency is “[a] digital or virtual currency that is not issued by any central authority, is designed to function as a medium of exchange, and uses encryption technology to regulate the generation of units of currency, to verify fund transfers, and to prevent counterfeiting.”1 Common cryptocurrencies include Bitcoin, Ethereum and Litecoin. “Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.”2
1 Cryptocurrency, Black's Law Dictionary (11th ed. 2019).
2 Press Release, Iowa Insurance Division, Iowa Insurance Division Reminds Investors to Approach Cryptocurrency with Caution (Jan. 4, 2018), https://iid.iowa.gov/press-releases/iowa-insurance-division-reminds-investors-to-approach-cryptocurrency-with-caution.
I. Can committees accept contributions in the form of cryptocurrency?
II. What is the reporting procedure for contributions in the form of cryptocurrency?
III. If the dollar value of cryptocurrency changes, how does the committee report that change?
IV. May a committee make expenditures using cryptocurrency?
Can committees accept contributions in the form of cryptocurrency?
This issue has arisen as candidates across the country have begun soliciting contributions in the form of cryptocurrency and donors have increasingly requested the option to do so. Various states have taken different approaches to the issue.3 The Federal Election Commission (FEC) issued an advisory opinion on the subject which determined that federal committees may accept cryptocurrency contributions.4 The FEC concluded that cryptocurrency contributions must be reported as in-kind contributions and may hold the contributions in a separate cryptocurrency wallet until they are liquidated. The FEC also noted that committees accepting these contributions are obligated to determine that the source and amount of the contributions is legal.
Applying the circumstances to Iowa law, the IECDB is of the opinion that cryptocurrency contributions are permissible. Although the term “cryptocurrency” contains the word “currency,” it is not “money” in the context of Iowa Code chapter 68A. As a nonmonetary thing of value, a contribution of cryptocurrency to a committee may be accepted as an in-kind contribution and should be reported as such.
3 Oregon adopted a statute prohibiting contributions in the form of cryptocurrency. Or. Rev. Stat. § 260.011. California’s Fair Political Practices Commission adopted a regulation prohibiting contributions in the form of cryptocurrency. Cal. Code Regs., tit. 2, § 18215.4 (2019). In contrast, the Texas Ethics Commission has proposed a rule to explicitly permit the acceptance of cryptocurrency contributions. The proposed rule would categorize such contributions as in-kind contributions and prohibit the use of cryptocurrency for expenditures. Proposed Rules September 2021, Texas Ethics Commission, https://ethics.state.tx.us/rules/proposed/2021-2025/proposed_Sep_2021.php#22.37 (last visited Jan. 21, 2022). According to the Executive Director of the Georgia Transparency and Campaign Finance Commission, Georgia permits the acceptance of cryptocurrency contributions, but requires that they be immediately converted to U.S. dollars so the value can be determined and ensure it is not in excess of the individual contribution limit. Emma Hurt, Georgia candidates accept crypto campaign donations, Axios, Jan. 7, 2022, https://www.axios.com/local/atlanta/2022/01/07/georgia-candidates-accept-crypto-campaign-donations.
4 FEC Advisory Op. No. 2014-02 (May 8, 2014), https://www.fec.gov/data/legal/advisory-opinions/2014-02/.
What is the reporting procedure for contributions in the form of cryptocurrency?
Like other in-kind contributions, cryptocurrency contributions must be reported on Schedule E, in accordance with Iowa Administrative Code rule 351—4.17. The recipient committee must obtain the name and address of the contributor. The recipient committee must report the fair market value of the contribution as of the date of the contribution. The recipient committee should include a note in its report to also note the specific amount and type of cryptocurrency that was received and whether or not it was liquidated. If the committee pays processing fees, that should be reported as a separate expenditure and not deducted from the value of the contribution.
If the dollar value of cryptocurrency changes, how does the committee report that change?
While the cryptocurrency is held as an in-kind contribution, there is no requirement to report its change in value. However, when a committee liquidates the cryptocurrency, the treasurer must deposit the proceeds in the committee’s bank account within seven days and the proceeds must be reported as a contribution on Schedule A. The name and address of the purchaser must be reported as a contributor. The committee should include a note, containing the original contributor of the cryptocurrency, the amount and type of the cryptocurrency, and the original value of the contribution. If the committee sells the cryptocurrency on a marketplace where there is no known purchaser, then there is no individual contributor. However, the committee must still report this receipt on Schedule A, listing the name of the marketplace. The committee should include a note stating how many units of cryptocurrency were purchased and that the purchaser is unknown, as well as the original contributor and original value of the cryptocurrency.
May a committee make expenditures using cryptocurrency?
Committees may not use cryptocurrency to purchase goods or services. All expenditures must be made from funds deposited in a bank account in a financial institution located in Iowa.5
In order to use the contribution to make expenditures, committees must sell the cryptocurrency and deposit the proceeds into the committee’s bank account before using the funds to make expenditures for goods and services.
5 See Iowa Code section 68A.203(1)(b); Iowa Administrative Code rule 351—4.15.
BY DIRECTION AND VOTE OF THE BOARD:
James Albert, Chair
Elaine Olson, Vice Chair
Zachary S. Goodrich, Executive Director and Legal Counsel
February 17, 2022
Pursuant to Iowa Administrative rule 351-1.3(6), a person who has received a board opinion or advice may petition for a declaratory order pursuant to Iowa Code section 17A.9. The IECDB will refuse to issue a declaratory order to a person who has previously received a board opinion on the same question, unless the requestor demonstrates a significant change in circumstances from those in the board opinion