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US Elections Regulator Gives Tentative Go-Ahead to Campaign Token

The Federal Election Commission has opened a draft letter to the public, in which they approve of Omar Reyes’ 2020 congressional campaign incentives tokens.

The Federal Election Commission (FEC) has tentatively approved an ERC-20 token issued by Omar Reyes to use in an incentives program for his congressional campaign. The FEC reviewed the coin project in a draft advisory opinion on July 5.

According to the draft letter, the FEC believes Reyes is within his rights to issue his Ethereum-based “Omar2020Token” (OMR) as part of his campaign to join the United States House of Representatives from the 22nd Congressional District of Florida

The FEC argues that because the tokens are essentially souvenirs, with no monetary value, Reyes’ committee is free to issue them as volunteer incentives:

“The Commission concludes that the Committee may distribute OMR Tokens to volunteers and supporters as an incentive to engage in volunteer activities as described in the request because OMR Tokens do not constitute compensation; rather, OMR Tokens are materially indistinguishable from traditional forms of campaign souvenirs and nothing in the Act or Commission regulations prohibits a campaign committee from distributing free campaign souvenirs to volunteers or supporters.”

As noted in the draft, these Ethereum blockchain-based tokens are intended to be used as campaign incentives only. The Omar2020 campaign will reportedly conclude with prizes awarded to the top three OMR holders, but will delete its Ethereum contract and dispose of remaining tokens upon the campaign’s conclusion.

The FEC previously wrote an advisory opinion in 2014 on financing campaigns with the number one cryptocurrency, Bitcoin (BTC). The FEC then said that campaigns could receive BTC as donations, but only as in-kind donations, i.e. as a donation of goods and services and not as money. This means that the BTC cannot be used in transactions directly, but could be converted to fiat money and deposited.

As previously reported by Cointelegraph, Democratic presidential campaigners Eric Swalwell and Andrew Yang have both offered to accept cryptocurrency donations for their campaigns.

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Medici Ventures Leads Funding Round for Blockchain-Based E-Voting Platform

Medici Ventures leads $7 million funding round for a blockchain-based platform that supports remote voting.

Medici Ventures, the blockchain-based subsidiary of, has led a $7 million funding round for a blockchain-based voting platform, according to a press release on June 6.

The blockchain-based voting platform, Voatz, is reportedly designed to allow citizens to participate in official elections and similar events via mobile devices, such as smartphones or tablet computers. The platform is reportedly based on blockchain tech, encryption, and biometrics, and purports to provide better convenience, security, and auditability for voters and vote collectors.

Voatz says that the proceeds of their $7 million Series A funding round will go toward improving accessibility and usability of the platform, as well as launching additional pilot programs in the United States and abroad. Voatz also commented that they have previously conducted pilot programs with a variety of organizations, such as state political parties, universities, labor unions, church groups and nonprofits.

Voatz has reportedly completed a pilot program in which military personnel and U.S. citizens living abroad voted on the platform in Denver, Colorado’s 2019 municipal elections. Voatz also broke ground with a pilot in which similarly out-of-country citizens and military personnel from West Virginia used the platform to submit absentee votes in the 2018 midterm elections.

Medici Ventures President Jonathan Johnson commented on how this application of blockchain technology is important, saying:

“Voting is a great application of blockchain technology. What Voatz is doing to allow more registered voters to participate remotely in elections in a safe and secure way is important. It bodes well for more widespread adoption of the Voatz application. That’s one reason we’ve increased our investment in the company by leading this Series A round.”

As previously reported by Cointelegraph, Russia’s ruling political party United Russia launched a blockchain-based voting platform last month. United Russia’s head of IT projects Vyacheslav Sateyev commented on the details of the platform, saying:

“Candidates will be able to fill in their personal pages on this site, including posting news, videos, photos, distributing their pages. The personal account is now integrated with all social networks. We have also made an adaptive version of the site for mobile phones.”

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Coinbase Files to Close Its Political Action Committee

U.S. crypto exchange Coibnase has filed to close down its political action committee.

Major United States-based cryptocurrency exchange Coinbase has filed to close its political action committee (PAC) on April 3.

According to a filing with the Federal Election Commission (FEC) — the regulatory agency in charge of enforcing election laws — Coinbase’s PAC received no funds nor made any disbursements, and is seeking to terminate the PAC.

Per FEC regulations, a PAC must file a termination report in order to cease operations once it no longer intends to make or receive contributions or expenditures.  

In the U.S., PACs are independent organizations, often representing different business, labor, or policy interests, that collect and donate money to political campaigns for or against candidates, legislation, or ballot initiatives.

Following the 2010 Supreme Court case of Citizens United v. FEC, PACs became the subject of some controversy and criticism, as some see them as means for corporate or union donors to put their thumbs on the electoral scale. PACs are forbidden from coordinating directly with the campaigns they support, but in some cases, coordination has occurred.

Coinbase formed its PAC in July of last year, and in September, it became a founding member of the Blockchain Association. The Blockchain Association is purportedly the first lobby group in Washington D.C. to exclusively represent the interests of the blockchain industry. Other members of the lobby group include technology startup Protocol Labs, as well as the Digital Currency Group and Polychain Capital.

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Denver Municipal Election: Another Small Stop on the Road to Universal Blockchain Voting

Despite widespread suspicion of the technology’s ability to underpin secure elections, some U.S. jurisdictions are pushing ahead with limited blockchain-enabled voting trials.

On March 7, news broke that Denver is slated to become the second United States jurisdiction to pilot a blockchain-powered mobile voting platform in its upcoming municipal election. Absentee voting will start on March 23 and will run until the Election Day, May 7. The announcement came almost exactly one year after the first initiative of this kind — deployment of mobile voting solution in West Virginia primaries and then midterm elections — was made public in March 2018.

Once again, it was the Tusk Philanthropy foundation that spearheaded the effort, while Boston-based technology company Voatz took care of the software side of it. This time around, the partnership also included the National Cybersecurity Center, a nonprofit that works to raise awareness of cyber threats to the integrity of election systems.

Whereas in West Virginia elections last year just about 150 people opted in to cast ballots via their mobile devices, the Denver campaign in May could see a much wider utilization of the technology. The target voting population is both service members and overseas citizen voters from the city and county of Denver, totaling around 4,000 people.

As the idea of using distributed ledger technology to record the expression of citizens’ electoral preference is still met with near-universal suspicion, this trial might become the largest blockchain-facilitated campaign to fill political offices in the United States to date.

County Snapshot / Denver County, United States

Forging the partnership

Tusk Philanthropies is on a mission to fix American democracy by means of dramatically increasing voter turnout — which should, in turn, improve the quality of political representation. They believe in mobile voting as a shortcut to more inclusive elections. Blockchain technology is an integral part of the organization’s strategy, due to the security and auditability that it brings to the process. At the same time, Sheila Nix, president of Tusk Philanthropies, made it clear in an email to Cointelegraph that the organization views the technology as an instrument rather than an end goal, and it remains open to an alternative solution, should it prove more useful:

“Blockchain is the most secure option that exists right now but we are vendor and technology agnostic and are open to new solution in the future. We think there is a lot of growth potential for blockchain-based voting — especially due to the auditability features.”

Always on the outlook of expanding their ambitious mobile voting program, the Tusk Philanthropies leadership began talking with the city of Denver and the National Cybersecurity Center last year. The foundation was attracted by the city’s “strong reputation in the area of elections” and saw the opportunity to move mobile voting ahead.

For Denver Elections Division, the two major selling points were convenience and security. Out of the two, security was paramount, so the city government engaged in a meticulous vetting process before giving the project a thumbs-up. As Jocelyn Bucaro, the unit’s deputy director of elections, recounted:

“We’ve been following the pilot in West Virginia very closely. We’ve conducted several demonstrations with Voatz and another vendor, and we ultimately decided, after talking with the West Virginia Secretary of State office, after Voatz went through a rigorous security review by our tech services team and after seeing the review conducted by Tusk Philanthropies of the security of the vendor, and after working with them to make improvements even over the West Virginia pilot last year to their application, we felt that it was appropriate for us to pilot this for our military and overseas citizen voters in municipal election cycle.”

Interestingly, the initiative took off without any involvement on behalf of the famously pro-blockchain Colorado Governor and former U.S. Representative Jared Polis, who hadn’t even announced his candidacy for governor at the time the project was conceived. Bucaro and her colleagues, however, sought some input from the Colorado Blockchain Council, whose several members were involved in the demonstrations.

Limited application

Bucaro also pointed out that mobile voting in the Denver election is not meant to replace paper-based ballots. Rather, it will be used to facilitate the process for a specific group of absentee voters — those who serve in the military or live overseas — and who are currently using email to return their ballots to election administrators:

“Military and overseas voters fall under an overseas statute that requires us to email them a ballot, if they choose to receive their ballot by email. Colorado law also permits them to return their ballot electronically. So this voting population was already able to receive a ballot that they could mark on a hosted website, and then generally they would email the ballot back to us as a PDF attachment to an email — which is not a very secure method of return, which is why this method using blockchain secure encryption, a distributed ledger that can’t be changed, offers a higher degree of security and auditability than simply an email attachment.”

Eligible voters will be required to request an absentee ballot, install the Voatz application, and go through the biometric authentication process. Identity verification entails submitting a photograph of voter’s government-issued ID and a 10-second “selfie” video. Once this is out of the way, the app permits the user to cast their vote, which it records to a distributed ledger. This is where the convenience part comes in: Each stage of the procedure doesn’t require anything except a cell phone, in contrast to the trouble of printing out, filling out and scanning paper ballots before emailing them as a PDF attachment.

The initial response from Denver’s military and overseas voters was rather enthusiastic. In less than one day following the announcement, some 90 people signed up to vote via their phones in the upcoming municipal election cycle. This showing, as Jocelyn Bucaro notes, is a good reason to be optimistic:

“Generally speaking, our overseas voters tend to participate in municipal elections at much lower rate than in federal elections. They don’t live here, so they are not as connected to who’s on city council or who’s running for mayor, so these elections have a much lower turnout among that population. So we were pretty excited to see almost 90 people sign up in just the first day after we’ve sent this newsletter out.”

Scaling hurdles

Despite the Denver pilot being a step forward in terms of expanding the potential number of voters involved, it still confines the use of the mobile platform to a very specific and narrow population. Given the pushback against the idea of using blockchain as a primary technological infrastructure in mainstream voting on behalf of the majority of influential election technology experts, it would be too bold to predict that the future of ubiquitous mobile voting is just around the corner.

As Cointelegraph reported last year, even West Virginia’s Secretary of State Mac Warner, who exuberantly reported on the success of the state’s trailblazing effort, made a point to emphasize that he will never advocate for using blockchain-powered voting solutions beyond overseas absentees.

To be clear, this time, it is not only about blockchain. For example, the authors of a recent report by the National Academy of Sciences on the future of elections contend that no internet-based modality could provide better security than paper-based voting — since at the current level of technological development, there is no way to completely rule out the threat of DDoS attacks and malware intrusion. With regard to blockchain, the report holds that this technology is not compatible with the inevitably centralized nature of elections, which is hard to dispute. There is a fundamental disagreement between the character of today’s institutional politics and the ideology of blockchain governance, so shifting to elections run on distributed ledgers will require not just instrumental, but ideological transformation.

Still, more practical issues persist: Cryptographers and election technologists remain unimpressed by the extant identity-management functionality of blockchain-based systems, as well as by the idea that a voter might lose their right for democratic representation for good once they lose their cryptographic key.

Neither of these seems to be a show-stopper for blockchain-enhanced elections advocates. The Tusk Philanthropies’ campaign to promote mobile voting is picking up steam, according to Sheila Nix:

“We have begun conversations with several other cities and states and expect to have additional pilots later this year and in 2020. We are especially excited to test the mobile voting technology for those with accessibility needs.”

Targeting special groups of voters that could benefit from technological developments the most seems to be the dominant strategy for the near future of blockchain and mobile voting. Jocelyn Bucaro also shares this vision:

“We think there is a lot of potential to offer with this type of voting technology, assuming this pilot is successful, to not only our military and overseas citizen voters but also to voters with disabilities who may not be able to vote via a mailed paper ballot at home without assistance. We’d love to be able to offer them a convenient way to vote independently and privately at home as well.”

Blockchain-friendly as Colorado is, there is also hope for statewide adoption, Jocelyn Bucaro admits:

“We have worked closely with the secretary of state office here in Colorado through our mock election period, and we’re engaging with them, and they are closely monitoring how the pilot goes. It would be a decision of the state, and possibly even the state legislature, whether or not to implement it on a statewide basis. We are certainly going to report out broadly how the pilot goes.”

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‘Hope Coin’: The Story of Malaysia’s Crypto Political Fundraising Platform

Crypto fundraising might be a great tool to fight corrupt regimes, but what happens when freedom fighters seize power?

The ongoing controversy surrounding Malaysia’s proposed political cryptocurrency, Harapan Coin, is far from letting up. On Nov. 26, the country’s finance minister, Lim Guan Eng, weighed in on the issue by reiterating that any entity looking to issue a cryptocurrency should first refer to Bank Negara Malaysia (BNM) and the Securities Commission:

“Don’t do it without Bank Negara’s guidelines or directive on the matter to avoid doing something wrong and against the law.”

During the same press conference, Lim Guan Eng also said that he had asked a government official — who has recently made a series of statements in support of the project — to tone down the promotional campaign until the financial authorities comes up with a coherent regulatory framework. The turbulence around the proposed asset, which is touted by its creators as “the world’s first political fundraising platform,” has been heightening throughout the last few weeks, as many of Malaysia’s prominent political actors voiced their doubts and concerns with regard to the project. Meanwhile, many aspects of Harapan Coin’s provenance and functionality remain opaque to the public.


Since the proclamation of Malaya’s independence in 1957 and until May 2018, a single political power — a coalition called Barisan Nasional (BN) — has been at the helm of the country’s government. Its three major member organizations represent Malaysia’s dominant ethnic groups: UMNO (United Malays National Organisation) is a party of the Malay majority, while Malaysian Indian Congress (MIC) and Malaysian Chinese Association (MCA) are the political bodies of the country’s Indian and Chinese communities, respectively.

The last decade saw BN’s political dominance erode, due in no small way to a series of devastating financial and political scandals that shook the highest tiers of the government.

Perhaps the most notorious of those is the still ongoing 1Malaysia Development Berhad (1MDB) scandal. In 2015, it was revealed that, as a result of a large-scale, multi-year embezzlement scheme, hundreds of millions of dollars have been siphoned off from the state-owned investment fund 1MBD into bank accounts associated with Prime Minister Najib Razak of Barisan Nasional.

Egregious as it is, this embarrassing episode of high-ranking officials abusing public funds is anything but unusual for Malaysia’s recent history. Before 1MDB, there was the Bank Negara Malaysia (BNM) forex scandal, in which the lack of oversight over the central bank’s adventurous trading activities resulted in the nation’s loss of billions of dollars.

Before the BNM forex wreck, there was the Bumiputera Malaysia Finance (BMF) flop, which involved a Hong Kong subsidiary of a Malaysian state-owned bank generously handing out impressive amounts of money in bad credits to Hong Kong-based property speculators. Long story short, there appears to be pattern indicating a persistent problem with the way Malaysian officials handle public funds — a problem big enough for blockchain-minded people to start thinking of a solution.

Taking on the unjust power of ill-gotten money in Malaysian politics has become the central idea behind the new Harapan Coin (literally, “Hope Coin”), conceived sometime in early 2017. Setting their sights on the 14th Malaysian General Election, scheduled for May 2018, the coin’s creators proclaimed it “The World’s First Crypto-Politic ICO” and marketed it as a means of funding the united opposition to Barisan Nasional.

The manifesto — found on the coin’s website — presented the group behind the project as “patriotic and concerned Malaysian citizens, within and outside of Malaysia.” Several personal accounts by backers from outside of the country featured stories of them not being able to contribute to previous campaigns due to the obstacles created by the allegedly BN-controlled Malaysian financial authorities.

The identities of the people working on Harapan Coin have been concealed all along, citing “the Draconian laws of limiting and non-respecting [sic] individual rights to freedom of expression of the current BN government,” the website contains only their first names, blurred pictures and locations in countries outside Malaysia.

The project’s website offers a mix of inspirational language, suggesting its role in advancing a much-needed political change — “a beacon of hope to supporters seeking a better future” — with some more pragmatic and profit-minded considerations — “Coin[s] collected are expected to rise in price. […] Buy into a new change, invest in a new era of democracy.” The website also explicitly stated that the coin had the “potential to become an official currency if Harapan wins [the] election.”


May 9, 2018, marked the first regime change in Malaysian history: Following the general election, the Pakatan Harapan (PH) coalition managed to secure 121 out of 222 seats in the Dewan Rakyat — the lower house of the nation’s parliament — keeping Barisan Nasional down to just 79 seats. It is unclear how much of this triumph was due to successful crypto fundraising.

Harapan Coin’s roadmap stated the ambitious goal of collecting $257 million in two rounds of an ICO before the election. While some reports suggest that coin sellers claim to have raised as much as $123 million in the presale and first round, this information is nowhere to be found in the project’s public-facing communications. The only figure available on the website as of late November appears to indicate that the amount of funds raised so far barely exceeds $800.

Harapan Coin was designed to provide the infrastructure to financially support the united opposition to BN in the May 2018 general election. Months after the electoral victory, the project’s website still features headshots of the Pakatan Harapan (PH) coalition’s politicians, accompanied by their campaign statements. It also mentions that the new digital currency is co-founded and supported by Khalid Samad, the Malaysian Minister of Federal Territories. Samad — who has been an MP since 2008 but became minister only with the advent of the new Pakatan Harapan government in July 2018 — is now the main driving force in promoting Harapan Coin post-election.

Now that the anti-BN coalition has prevailed, it looks like Samad is working to repurpose the Harapan Coin infrastructure to serve the fundraising needs of his coalition in the new political environment, where they are the incumbent political power rather than the opposition aspiring to topple a longstanding regime.

While the project’s objectives prior to the election were straightforward, they are now much murkier. Is it now going to be a single political party’s own coin? What about the vague promises of the possibility for the coin to become legal tender if the election was won? The fact that both the white paper and website haven’t been updated since before the May election doesn’t help to illuminate the matter.

Nevertheless, Khalid Samad keeps pushing for the coin to be officially recognized. On Nov. 13, he announced that paperwork for Harapan Coin’s presentation before Bank Negara Malaysia (BNM) and Prime Minister Tun Dr Mahathir Mohamad. A week later, Samad mentioned that the project was under review by a Bank Negara Malaysia taskforce. The minister’s advocacy campaign, however, was met with criticism from all across the Malaysian political landscape.


It should come as little surprise that one of the biggest issues that critics take in regard to the design of Harapan Coin is the proposed distribution of the funds raised. The current breakdown stipulates that as much as 30 percent of the money will go to the system’s administrators — who, as mentioned above, remain effectively anonymous. Another 30 percent is meant for Amanah, Khalid Samad’s own political party. Given that the coin is proposed to be state-backed — and possibly even used for paying state fees and fines — this would clearly grant one of the political groups an upper hand over all others at the expense of the government.

This was just one of the concerns raised by the nonprofit Centre for a Better Tomorrow (Cenbet) in a recent statement that warned all the parties involved of the project going “against the principles of good governance.” The group’s representative also stressed that the way the coin’s design facilitates political donations from overseas may open up the Malaysian political system to influence from abroad.

While it is hardly unexpected that recently deposed Prime Minister Najib Razak has spoken out against Harapan Coin, the sources of criticism are not confined to Samad’s political opponents. Fahmi Fadzil, a member of parliament who represents one of the parties that constitute the Pakatan Harapan coalition was among those politicians who admitted to having reservations with regard to a lack of mature regulation of cryptocurrencies, as well as potential issues associated with anonymity.  

One more blow to Harapan Coin’s prospects came from a somewhat unexpected direction. Dr. Zulkifli Mohamad Al-Bakri, mufti of the federal territories and one of Malaysia’s most authoritative experts on Islamic law, has recently stated that Bitcoin (and, by extension, other cryptocurrencies) should be considered haram, or forbidden. This could mean a lot in a country where over 60 percent of population practices Islam. Minister Samad hopes to address the mufti’s concerns by establishing a governing body to oversee Harapan Coin’s operations and ensuring its compliance with the religious authority’s vision.

Dim prospects

Overall, Harapan Coin in its current shape does not particularly look like an endeavor that is bound to succeed in the near future. Although it is aggressively promoted by a resourceful co-founder who happened to find himself in a high office, it is decried by civil society groups and religious authorities, while the financial arm of the government examines it with great caution. Neither does it enjoy political support from the national leader or members of the governing coalition outside of Khalid Samad’s own party.

Whereas the idea looked appealing at the time when the unified opposition forces were bracing themselves to overturn the incumbent regime, the subsequent victory has made the divides within the triumphant Pakatan Harapan coalition even more pronounced, and at the same time obscuring the need for an alternative political fundraising infrastructure.

It would help if Harapan Coin’s backers could clearly articulate their renewed plans and objectives, yet no such information seems to be publicly available. From what could be inferred about the project now, it is designed to blur the boundaries between the state and political parties, while lacking a clear definition of the mechanics of the proposed system, information about its developers and any particular checks on power abuse embedded into its design. For a country with a long history of financial wrongdoings at the hands of the powerful, this combination hardly makes for a strong pitch.

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California Is Open to Allowing Crypto Political Donations

Candidates for public office in California may soon be able to accept cryptocurrencies as donations.

The California Fair Political Practices Commission met on Thursday to discuss a number of election issues facing the Golden State, including whether candidates for public office can accept cryptocurrencies as part of campaign donations.

Ultimately, the commissioners didn’t make a decision to adopt any of the proposed amendments during the hearing, acknowledging that they don’t understand the issue fully. Back in 2014, the Federal Election Commission ruled that federal election law allows for candidates to accept cryptocurrencies like bitcoin as an in-kind donation.

During the hearing on Thursday, chairwoman Alice Germond indicated that a set definition for a “cryptocurrency” is needed, remarking:

“I would be inclined to think that bitcoin is a thing that is not U.S. money but is more like a currency, like the euro. But I would like to hear more to develop my thinking on this.”

More time to study

A public comment from Nicolas Heidorn – policy and legal director of the nonpartisan political advocacy organization California Common Cause – suggested allowing cryptocurrency donations until the commission has further studied the matter. In the end, the commissioners disagreed with the idea.

Commissioner Allison Hayward, in particular, pushed back against the idea of banning cryptocurrencies as donations outright, saying that she would like to gather more information before making a decision.

“I think cryptocurrencies are obviously new and designed to be confidential but the blockchain technology I think might ultimately be a very robust tool in tracing activity,” Hayward said, adding:

“I don’t think we’re there yet, but I would hate for something we do to forestall that later on. I don’t know what that would be but … blockchain might be a very useful tool for us and I’d hate to prevent that.”

Commissioners Brian Hatch and Frank Cardenas both said they disagreed with the concept of an outright ban, but in the case of Hatch, the issue of fraud remains a paramount one. He raised the prospect of a candidate claiming a crypto-donation that came from within the state, when, in reality, it actually had a different point of origin.

The commissioners came to a brief agreement that a cap of roughly $100 per donation may be appropriate for this year’s midterm elections. The commission would then be able to continue studying the matter in 2019, when there wouldn’t be an immediate election to consider.

However, this suggestion was not formally adopted during Thursday’s meeting. The commission will meet again next month to discuss the issue.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Bitcoin-Friendly US Senate Candidate Defeated in Republican Primary Elections

U.S. Senate candidate Austin Petersen, who is known for his Bitcoin (BTC) advocacy, lost the Republican primary election Aug. 7.

According to unofficial results published by the Missouri Secretary of State, Petersen lost the battle to Attorney General Josh Hawley, who received 58.6 percent of the 663,553 votes. Hawley will go on to face to Democratic Missouri Sen. Claire McCaskill in the general election. Petersen tweeted:

“Sorry I couldn’t pull out a win for us, friends. My faults as a candidate are my own, and not the fault of our activists. I am not a perfect messenger. One day soon I believe we will see more leaders who rise up and fight for our cause more fiercely and more successfully than I.”

In February, ABC News reported that Petersen’s campaign for Senate received 24 donations in Bitcoin amounting to just under $10,000 total. One such donation was reportedly the largest BTC donation ever received in a federal election.

Upon the receipt on Dec. 20, the contribution of 0.284 BTC was purportedly converted to U.S. dollars. At the time the donation was worth over $4,500, putting the donation over the Federal election limit of $2,700 per individual. The candidate’s website explained that the first $2,700 would go toward activities in the primary election, while the remaining amount would be used in the general election. Petersen’s campaign manager Jeff Carson said on his behalf:

“I think it goes without saying we’re going to see a lot more of [cryptocurrency] in terms of campaign contributions and campaign financing… Austin is personally a fan of competition in the marketplace, even when it comes to our currency. With the rise of cryptocurrencies like Bitcoin, it was a no brainer for us to use those.”

Petersen’s campaign represented an opportunity for crypto advocates to have a lawmaker on their side on Capitol Hill, as some members of Congress call for increased control and others characterize crypto outright as a refuge for “charlatans and scammers.”

Some American lawmakers are taking a more tempered approach to digital currencies, even becoming hodlers themselves. Earlier this week, Cointelegraph reported that the Chair of the Judiciary Committee of the U.S. House of Representatives revealed that he has holdings in Bitcoin, Ethereum (ETH), and Bitcoin Cash (BCH). Congressman Bob Goodlatte (R-VA) reported that he owns between $17,000 and $80,000 in crypto on his mandatory annual Financial Disclosure Statement.

Meanwhile, Libertarian Party candidate for Wisconsin governor Phil Anderson said in July that he will accept BTC donations despite the state’s Ethics Commission’s finding them a “serious challenge” to compliance with state law. Anderson stated that  his decision to accept BTC does not mean his party is “thumbing [their] noses at the [commission],” as he believes they are abiding by the law.

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Democracy of Two: NEO and the Crypto 'Election' That Wasn't

What constitutes an election?

According those backing ethereum competitor neo, just one candidate and two voters.

The public blockchain project, whose tokens are valued at over $2 billion by crypto investors, went so far as to claim in a July 4 blog post that it had entered a “new era” in which its token holders will have a say in how decisions are on the network are made, but even insiders are skeptical such assertions may be little more than rhetoric.

Case in point, the NEO Foundation, which develops software for neo, announced this month that it had elected the first node to its network, a foundation-funded collective of NEO developers calling themselves City of Zion. Less publicized at the time, however, was that token holders were not allowed to participate in that vote.

As such, even those running the newly elected node aren’t exactly convinced that neo is fully committed to running its blockchain with broad participation from users, at least at this time.

“I would personally disagree with calling it an election,” Ethan Fast, a member of the City of Zion team, told CoinDesk in an interview. “That’s not a word I would choose.”

More broadly, such a conclusion is instructive in that neo is one of a growing number of public blockchains seeking to implement a more centralized model for how blockchains can be managed. Called delegated byzantine fault tolerance (dBFT), neo’s specific idea is that by consolidating decision-making to a small group of nodes, the software can become faster and more useful.

Its a break from bitcoin’s mining model in which any node operator who abides by the rules can compete to approve transactions, and one that has seen a handful of projects including EOS and Tron raise billions with big promises that it can prove viable.

In this way, neo, which has close ties to blockchain solutions company Onchain and the public Ontology project, has adopted technology it believes will address scalability issues — specifically, slow transaction speeds and controversial network upgrades.

“[The] NEO Council values efficiency (quick response and protocol upgrade) over decentralization (sometimes a crypto-political correctness) at this early stage,” the project’s governing body, now called the NEO Foundation, explained in a May post.

However, neo is perhaps unique in that it hasn’t provided much in the way of details on how it aims to do this in a way that will add up to the democratic process its touts.

Neo’s white paper and website do not provide a detailed description of its governance model, and further, the foundation has said in blog posts that it plans to maintain “decision-making power” until the “core protocol stabilizes,” though it has not defined what criteria constitute stability.

Once the foundation is confident in the strength of the network, it says it “expect[s] to see one to a few dozens of consensus nodes to be elected by NEO holders.” But before token holders are able to vote for candidates, the foundation plans to “elect” several private nodes, of which City of Zion is one.

A ‘benevolent oligarchy’

That might be one reason why other supporting language issued by the foundation has positioned the election as the first step in a long process to relinquish some of its power to token holders.

Still, the NEO Foundation’s use of the term “election” to describe the process by which City of Zion became a node at all has triggered some skepticism.

While “election” would arguably imply that a multiplicity of votes were cast, blog posts suggest that the NEO Foundation is currently the only voting entity in the ecosystem. City of Zion’s Fast confirmed that “there was no one from the public that voted in this election besides the NEO Foundation.” Likewise, of the foundation, only project co-founders Da Hongfei and Erik Zhang have the authority to make decisions, according to another blog post.

As such, Fast instead described NEO as “a kind of benevolent oligarchy,” and said that the community has been frustrated that the foundation has been slow to surrender some of its decision-making power.

“Just a small amount of decentralization in the short term is something CoZ has been pushing for for some time,” he said, adding that it “may not be happening as fast as [the community] want[s].”

Dean Eigenmann, founder of blockchain governance startup Harbour, was more critical of the foundation’s “election.”

“Libya had elections under Gaddafi, too,” he said, explaining further of the project:

“It just seems so uninteresting because it’s like they aren’t even trying to decentralize their governance. They were like, hmm this seems too hard. Let’s just keep it centralized.”

Degrees of democracy

NEO is not the only project to be criticized for how it is going about the election of nodes.

Ethereum founder Vitalik Buterin warned in March that blockchains that use “coin voting” seem “to lead to a high risk of economic or political failure of some kind.” Likewise, Kyle Samani, managing partner at crypto fund Multicoin Capital, wrote on Twitter in June that EOS and Tezos, two other project seeking to compete on governance, are both “plutocracies.”

However, Richard Lee, founding partner at crypto fund Global Blockchain Innovative Capital took a more flexible position in an interview with CoinDesk, arguing that “there’s different levels of decentralization.”

“I think the different consensus protocols, at least right now, there’s trade offs in between. Sometimes you have to sacrifice decentralization for speed and efficiency or security,” he said, adding:

“Neo’s trying to address scalability in a different way than ethereum is… Neo has a more centralized approach for that.”

Lee said he interpreted the foundation’s use of “election,” “as more of, the NEO Foundation does not run all the nodes now,” and added, “I don’t see anything malicious or deceitful about that.”

Some participants in neo community forums were nonetheless skeptical of the election, with one reddit user posting, “Decentralization goes way beyond the amount of nodes. It has to do with governance and decision making. If you still have a central entity deciding new features, etc you cannot become fully decentralized.”

However, other comments reflected Lee’s conclusion about the election, with many participants greeting the announcement of the election with enthusiasm.

Whether neo will follow through on its promise to empower token holders remains to be seen.

According to a timeline published in a blog post, the foundation plans to elect Dutch telecommunications company and neo partner KPN and Chinese venture capital firm Fenbushi Capital to operate the next privately held nodes in the network by the end of 2018. It intends to allow token holders to both vote for and campaign to become nodes in 2019.

The NEO Foundation did not respond to requests for comment. 

Image via Neo Community Facebook

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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The Dangers of Perceived Anonymity: Russian Hackers’ Bitcoin Trail

The cryptocurrencies’ potential to facilitate money laundering and financing illicit activities has long informed Bitcoin-insecure politicians’ hawkish postures on crypto regulation. With the release by the Department of Justice (DoJ) of an indictment of twelve Russian intelligence officers last Friday, which includes a count of an alleged conspiracy to launder money ‘through cryptocurrencies such as Bitcoin,’ statesmen of this bent have procured a powerful supplement to their rhetorical toolkit – a formally recorded instance of a Bitcoin-backed interference into a vital sector of domestic affairs.

The only consideration that makes the news look somewhat less haunting for the future of cryptocurrency policies in the US is the power of partisanship in the current highly polarized political climate. While Democratic lawmakers now have all the latitude to exploit the Bitcoin menace in pushing the collusion agenda against the Trump administration, Republicans wishing to blast cryptocurrencies as a national security threat will have to be careful with the evidence produced by the investigation that the president and his allies have repeatedly challenged.


The controversy around possible Russian interference in the 2016 presidential election became a constant in the US public discourse even before the campaign itself has concluded. The hacking of Democratic National Committee’s and Hillary Clinton campaign’s servers, as well as widely publicized leaks of sensitive information ostensibly designed to jeopardize the former First Lady’s bid that followed, stand at the very center of a convoluted web of events, actors, and waves of media frenzy over particular episodes of this ever-sprawling saga. The recent indictment presents a timeline of the hackings in granular detail.

The indictment is a product of a Special Counsel investigation – a probe started in May 2017 under a former Director of FBI Robert Mueller. The scope of its interest includes everything related to the alleged Russian interference in the 2016 election, including the Trump campaign’s possible cooperation and coordination with Russians. The probe resulted in a number of high-profile indictments of Trump’s former aids, avoiding so far allegations of the president’s personal involvement.  Unsurprisingly, many in the Trump camp refer to the investigation as a ‘witch hunt’ and a nefarious scheme of the ‘deep state.’


The indictment names twelve defendants (all are officers with GRU, a Russian military intelligence agency) and brings eleven federal crime counts against them. Those include a conspiracy to commit an offense against the United States for the purpose of interfering with the 2016 presidential election by the means of releasing hacked documents (Count One); aggravated identity theft against eight victims whose personal details were used as a part of the hacking scheme (Counts Two through Nine); a conspiracy to launder money (Count Ten); a conspiracy to commit an offense against the United States by hacking a number of state organizations and US companies.

The main body of the document details step-by-step the spearphishing attacks on DNC and Clinton campaign computers, theft of officials’ identities and subsequent stealing of electronic documents, followed by their strategic release through the website, which the defendants registered for this purpose. They also attempted to pose as a group of ‘American hacktivists,’ and later created a fictitious persona of Guccifer 2.0, a Romanian hacker, to further conceal their connections to the Russian government. Finally, the GRU officers hacked into the computers of several state election boards and software companies to get hold of voter data.

Yet to the greatest interest to crypto community is Count Ten, which specifies the financial infrastructure behind the whole operation. According to the investigators, Russian officials used a variety of sources and currencies, including US dollars, in order to support the scheme, but their primary instrument was Bitcoin due to its ‘perceived anonymity.’ The main use of digital money was to pay for servers that stored stolen documents and for domains used to publicize them. The hackers also bothered to diversify the sources from which they drew the money, from peer-to-peer deals to decentralized exchanges to running their own mining operation. As the indictment’s authors observed, ‘The use of Bitcoin allowed the Conspirators to avoid direct relationships with traditional financial institutions, allowing them to evade greater scrutiny of their identities and sources of funds.’

All the sophisticated efforts to double back proved insufficient, as the conspirators still left back some imprints. For one, they used the same computers to negotiate BTC transactions and to send spearphishing emails. The DOJ investigators were also able to track the Bitcoin that the GRU mining rig produced all the way to the Romanian company that registered the domain.


No bombshell statements by high-ranking officials outside of DOJ itself descended on the cryptocurrency realm over the weekend. However, it is too early to conclude that the threat of moral panic over Bitcoin can be dismissed. Given the contentious and explosive nature of the investigation’s subject matter, it would be reasonable to expect that someone might still be bracing themselves to score political points in an easy attack on what appears to have facilitated a grave threat to national security.

Meanwhile, one of the most heavily interviewed experts in the wake of the indictment news was Jonathan Levin, co-founder and COO of Chainalysis. His firm has built its reputation on exactly what the DOJ officers have done to come up with Count Ten – analyzing the blockchain to trace movement of money and link the nodes and wallets to their owners’ identities.

Levin declined to reveal whether Chainalysis have been involved in the investigation; the official statement only cites the FBI’s cyber teams in Pittsburgh, Philadelphia and San Francisco, as well as the National Security Division as the entities that have contributed to the effort. But since it’s not uncommon for governments to enlist private firms like Chainalysis in blockchain-related probes, it’s not difficult to imagine one or even several private contractors working alongside federal agents on this case.

In crypto subreddits, users habitually call for the media to leave Bitcoin alone and instead ‘mention the Colombian drug lords getting paid billions in USD for selling drugs.’ The notion of cash being a far more pervasive vehicle for money laundering seems to be the most common trope.

Emin Gün Sirer, a Cornell computer scientist, noted that the coverage of the indictment ‘is meant to point out the danger that cryptocurrencies pose.’ But on the flipside, “That danger, and empowerment, is what makes them so exciting.”