The state of California has recently lifted a ban on donations made to political campaigns using cryptocurrencies. The ban comes at a time when crypto is gaining notoriety as a major risk following its explosive rise in value. 

As one of the most tech-friendly states in the nation, California’s acceptance of crypto has the potential to spur the crypto markets while also opening up a new platform for debate - decentralization. 

Crypto donation rules

For the new allowance of crypto donations to be accepted, the Fair Political Practices Commission elected that political candidates are required to exchange their crypto donations for fiat currency immediately. 

By requiring candidates to sell their crypto immediately, it removes the chance that a donation can change its value. This is helpful in several ways because it prevents any capital losses on the donation and also prevents candidates from receiving more money than what was originally sent. 

Candidates are also protected against any insider trading, which happens often in web3 because the receivers will not be allowed to wait for gains or losses. In effect, a candidate will not be able to profit if a donor wants to send a small amount of crypto while being aware that its value will increase soon. 

Crypto processor

To achieve  immediate exchanges, the Fair Political Practices Commission is requiring a cryptocurrency processor to be implemented which will also record the information of each donor so that candidates will know who is supporting their campaigns. Like any campaign donation, this transparency will help keep candidates informed about who is most willing to help them succeed.

State and federal laws

California has had a ban on crypto donations to political candidates for nearly 4 years now which is well before NFTs and covid became a party of our everyday lives. At that time, crypto was still considered a fringe investment by speculative investors. 

Now that the adoption of cryptocurrencies has escalated tremendously in those 4 years, we are now seeing one of the most high-tech states begin to change its attitude towards blockchain-based currencies. 

California is now one of 12 states which formally allow the use of cryptocurrencies for political donations. However, this is only in regards to state and local campaigns. Federal regulations have already allowed cryptocurrencies to be used as donations for national campaigns. 

The United States federal government has also already begun investigating and studying different aspects of blockchain technology in an executive order about cryptocurrencies that was signed by President Joe Biden in March 2022. 

A new political debate

Following the public’s increasing awareness of cryptocurrencies, bitcoin and other digital currencies are starting to appear on ballots as concerns involving the environment, illegal trading, and taxation are all being brought up by the general voting population. 

By providing a crypto wallet address for donations, political candidates are already choosing a side and telling voters what their opinions on blockchain technology are by accepting such donations. As adoption continues to grow, this method of branding will let voters choose quite easily who they will support. 

Whichever way voters choose, the allowance of this new form of donations will have a lasting impact on other states and countries. California is the largest state by population in the country and also supports one of the largest economies in the world, vastly outperforming every other state in the union. With California’s massive focus on technology, this new avenue of cryptocurrency adoption sets the stage for the rest of the country to follow.