With the 2022 midterm elections right around the corner, some candidates are embracing new methods to bolster the campaign coffers by turning to cryptocurrency and NFTs (non-fungible tokens).
Republican Blake Masters, who is running for U.S. Senate in Arizona, has offered NFTs as incentives for donors. So has Shrina Kurani, a Democrat running for U.S. House in California.
Masters recently raised nearly $575,000 in campaign contributions by selling NFTs to supporters. Masters minted 99 limited edition NFTs based on the cover art of “Zero to One,” a book he co-authored with Silicon Valley billionaire Peter Thiel.
Kurani raised $6,610 with fewer than one dozen tokens.
What are NFTs and cryptocurrency?
Cryptocurrency is a digital asset-based currency that exists on a network that is distributed across a large number of computers on blockchain technology. This decentralized structure allows the currency to exist outside the control of governments and central authorities, which makes it nearly impossible to counterfeit or double-spend.
While the two are often confused, NFTs are different from cryptocurrency. When something is non-fungible it means that the individual parts which make up a good or commodity are not interchangeable. Non-fungible tokens are cryptographic assets, each with a unique identification code, that also exists on a blockchain.
NFTs can be used to represent real-world items such as artwork, real estate, individuals’ identities, property rights, and more. By making real-world items into a token, people are more efficiently able to sell, buy and trade with a much lower risk of fraud.
Both cryptocurrency and NFTs use blockchain technology, a distributed database that is shared among the nodes of a computer network. A common blockchain metaphor is that blockchain is like our pattern of thought: just as blockchain requires a network, our pattern of thought requires a functioning brain and open mind.
How are regulators treating NFT and crypto campaign financing?
The Federal Elections Commission in Advisory Opinion 2014-02, concluded that cryptocurrency are classified as “money or anything of value” within the meaning of the Act, thus opening the doors to candidates receiving these different types of money as contributions.
As of right now NFTs are not considered to be securities. However, they could become subject to such regulation in the future. The U.S. Securities and Exchange Commission is still studying the potential for money laundering, tax evasion, and other financial crimes that NFTs could enable due to the anonymity they offer.
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