A Reuters report published on Oct. 8 claimed that Japan’s internal affairs and communications minister, Sanae Takaichi, confirmed to ministers in the country that crypto donations are not subject to financial regulations.

However, in the same announcement, Takaichi mentioned that donating cash or securities directly to a politician or a campaign is illegal. Only through technicalities in classification have crypto assets been able to fly under the radar of regulatory ordinance. As a result, politicians in Japan can receive individual crypto campaign funding without reporting the donations publicly.

Crypto regulation in Japan

Notably, Japan is one of the few countries to legally accept crypto. However, the country’s Political Funds Control Law, which controls crypto donations, doesn’t include crypto assets. There are two ways to look at this scenario. 

The first way is through acknowledging that technology is outrunning regulators. Even though the Japanese Financial Services Agency proactively regulates crypto and has made it taxable for individuals, incorporating it in the entire constitution will take time — loopholes still exist and years of regulatory efforts are needed to cover all the gaps.

The second way is that laws governing individuals seem to pass with relative ease. Making cryptos taxable was advantageous for the government, resulting in the law being passed swiftly. However, legislation that gives politicians more power, like receiving unlimited anonymous funding through legal loopholes, will likely be overlooked for a long time. In an email to Cointelegraph, Alexey Ermakov, CEO and founder of financial services platform Aximetria, expands on this outlook:

“Governments and corporations around the world create and lobby artificial financial restrictions for people, in order to maintain full control over their money and make even more money on these restrictions, forcing people to use only those financial instruments that they can control, i.e. banks. The situation in Japan is just another instance to support this view.”

There are others who believe that documenting donations on blockchain could lead to an increased trust in the system. The transparency afforded by cryptocurrencies can make them beneficial to politicians, some of whom have struggled with them concerning financial contributions as well as the identities of their donors. Raising campaign funds with crypto would make their donors and donations a matter of public record.

Crypto donations for politicians in the U.S.

The United States Federal Election Commission has provided guidance on how politicians can receive Bitcoin (BTC) as a contribution. Unlike Japan, these donations have to be disclosed as donations. The trend of politicians embracing crypto donation began with Republican gubernatorial candidate Andrew Hemingway way back in 2014. The same year saw Dan Elder, who was running for the U.S. House of Representatives in the state of Missouri, becoming the first congressional candidate to fund his campaign solely with Bitcoin.

Kentucky Sen. Rand Paul became the first presidential candidate to accept Bitcoin for funding his 2016 campaign. Although Paul had expressed skepticism toward crypto, it was a logical political move considering the grassroots, libertarian support he fostered. In the 2020 election, after the decision by Rep. Eric Swalwell from Californian to withdraw from the presidential primary race, Andrew Yang is the only candidate that remains who accepts crypto donations.

The 27-year-old Agatha Bacelar, a Stanford engineer and designer running against Speaker of the House Nancy Pelosi, announced that she will be accepting cryptocurrency donations — including Bitcoin, Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC) and USD Coin (USDC) — through Coinbase to raise funds. 

Numerous others in the U.S. have also made efforts to raise donations through crypto. Other countries have politicians raising funds through crypto too. For example, in Russia, opposition figurehead Alexey Navalny raised over $3 Million in Bitcoin donations. 

Is it a marketing ploy?

Political fundraising through crypto could be used as a marketing tool more than a financial one. Candidates who accept crypto also do it to make a political statement. While Yang looked to strengthen his tech savvy image, Paul did so to gain more libertarian support. Talking about Yang accepting crypto, principal of Shipkevich PLLC and derivatives attorney Felix Shipkevich told Cointelegraph:

“This has been reported as a marketing ploy to appeal to a younger, more tech savvy audience. Yang's acceptance of crypto could have positive side benefits however, including adding a layer of accountability around his donations as blockchain permanently records every transaction and the identity of the donor.”

A 2018 survey conducted by Clovr reported that 62% of eligible American voters believe that  crypto donations could be used illegally in the U.S. political system — although the same poll showed that 60% want crypto political donations to be legal. 

Some politicians like Hillary Clinton have rejected crypto donations in the past, for similar reasons that politicians accept cryptos. She was trying to appeal to the population that doesn’t trust crypto. 

Crypto donations not restricted to political campaigns

Crowdfunding through crypto appeals to its inherently decentralized nature. The popularity of initial coin offerings and initial exchange offerings are a testament to it. And donations through crypto are gaining favorability, even in large organizations.  

Related: IEOs, ICOs, STOs and Now IDOs — How to Raise Funds for Crypto in 2019?

On Oct. 8, 2019,  the United Nations Children's Fund (UNICEF) launched a crypto fund. It announced that it will accept Bitcoin and Ether to support open-source technology benefiting children and young people around the world. Other prominent aid agencies that accept donations in digital assets are American Red Cross and the U.N. World Food Program. 

The decentralized infrastructure provided by such crypto funds offers nonprofit organizations the advantage of bypassing expensive fees and middlemen traditionally required to move large amounts of cash overseas quickly. Additionally, tracking donations becomes easier and has the potential to allow donors to see how their money is used. On charities accepting cryptos, Ermakov said:

“In the context of donations, cryptocurrency plays, as a rule, a different function. Charitable foundations should regularly publish reports on their activities, indicating the sources of donations and how the money is being spent. Secondly, donating money to charitable organizations does not imply any kind of privilege neither political nor economic — this is very important.”

As global charities realize the benefits of donations through cryptocurrencies, the taboo associated around cryptos will likely diminish in the public’s eye. The software infrastructure around crypto also has to improve, and stories of hacks should be out of the news cycle to help with the perception. However, once adoption of cryptocurrencies spreads in the public domain, there is no doubt that politicians will start to look at raising funds through crypto.