Donald Trump Accepting Crypto Donations May Raise Compliance Issues

Key Takeaways

• Key crypto figures have pledged their support to Trump’s presidential campaign.
• Tight campaign regulations mean some donations may run afoul of federal laws.
• Human-readable addresses can make it easier to donate and stay compliant.

For the first time in a U.S. election, there’s a major political candidate who is now accepting crypto donations.

Donald Trump is wooing the crypto industry by repeatedly claiming he’s in favor of digital assets — even claiming all remaining Bitcoin (BTC) should be mined in America.

That’s a pretty substantial U-turn for a man who, just a few short years ago, described BTC as a scam that was undermining the dollar. Despite that, the crypto community’s reception of Trump’s U-turn seems to be positive.

It’s understandable that many American crypto investors — and even some everyday consumers — might be tempted to donate some of their stack to his re-election campaign.

Indeed, blockchain analytics suggests that Trump’s already received ETH and USDC worth at least $8.86 million through a single Base receive address since April 16, 2024.

Understanding the Threats

The current security measures underpinning blockchains and cryptocurrencies are in desperate need of reform, with vulnerabilities that bring downsides for any candidate collecting crypto.

One of the biggest concerns for voters is that their addresses are publicly exposed, meaning they could be tracked by political rivals and opportunistic criminals.

This could be solved by ensuring that every donor makes their contributions to a new private address and from a new private address, as initially envisioned by Bitcoin’s pseudonymous inventor Satoshi Nakamoto.

However, given the tight regulations surrounding campaign finance, any change here would need to be accompanied by a cryptographic proof of identity to show donations are legal. 

We’ve already seen some heavyweights in the crypto space fall afoul of federal laws when throwing their support behind the former president.

For example, Cameron and Tyler Winklevoss ended up receiving a total refund of $300,000 after donating $1 million each to Trump — a seven-figure sum that broke legal limits.

In some countries, backing opposition candidates can come with huge ramifications — including jail time or even the loss of life.

Meanwhile, existing crypto infrastructure can also create some big headaches for the Republican nominee and his aides, especially when it comes to phishing attacks or poisoning campaign funds with “dirty crypto.”

The latter is where malicious actors cause problems by sending stolen funds directly to Trump’s official address, which could taint the entire wallet and lead to it being frozen.

Blockchain analytics would be required to isolate illicit coins, but this can take time, and there isn’t much of a provision for it in existing campaign finance laws.

It’s also pretty impractical for larger donors, known as “whales” in the crypto community, to send funds under the radar because significant contributions are easy to trace.

Recent figures indicate that the vast majority of transactions sent to Trump’s wallet are under $100 in value, but 44 have been worth between $10,000 and $100,000 with an average value of $24,000.

Downsides for Consumers

The risks are greater still for political supporters who have never interacted with cryptocurrencies before.

An analyst simulated what the experience would be for a beginner who’s never set up a wallet or made a transfer before. The entire process took 45 minutes, which isn’t very intuitive.

But even those who do know their way around the ecosystem — and have years of experience — can end up getting their fingers burned.

Right now, donors through the ex-president’s official site must complete Know Your Customer checks before completing their transaction.

But this leaves the campaign’s address exposed, meaning anyone can subsequently make stealthy donations without going through the KYC process.

The Role of Human-Readable Addresses 

Human-readable addresses, rather than alphanumeric ones, eliminate the need to share wallet details. 

Using @Trump2024 would be a no-brainer when compared with an indecipherable string of letters and numbers, reducing errors while making the flow of crypto easier to trace.

With human-readable addresses, users can still share cryptographic proof of their identity, adding an additional layer of compliance and enabling campaigns to stay on the right side of the law.

There are other advantages, too. Third-party observers would be unable to see who has donated what, and malicious actors would be prevented from sending tainted funds.

Send-to-name solutions make it easier for novices to get involved by backing the candidates they believe in.

More than 50 countries around the world — home to half of the global population — are heading to the polls this year.

Crypto can ramp up political engagement and give voters a much louder voice. But the potency and potential of digital assets as a donation method will only be realized if persistent issues that blunt their utility are dealt with first.

Certain data included in this piece has been provided by MatterFi.