While the political battle lines on same-sex marriage are stark, they couldn't be murkier for cryptocurrencies.
California Lt. Gov. Gavin Newsom is used to being on the leading edge of controversial issues like same-sex marriage. This election cycle, he's out there again, as one of the nation's first high-profile politicians to accept contributions in bitcoin, the controversial virtual currency.
But while the political battle lines on same-sex marriage are stark, they couldn't be murkier for cryptocurrencies. Regulatory agencies and watchdog groups are miles behind the technorati in understanding the currency, and are struggling with how to monitor it.
There is, however, a political payoff for candidates who embrace bitcoin, which has the backing of top Silicon Valley venture capitalists and is favored by young techies for its transparency and disruptive nature.
"What it does is say, 'Hey, Millennial generation. I'm cool, too,' " said Robert Molnar, a former California Republican political strategist who is founder and CEO of KryptoBucks Capital, a startup in cryptocurrency. "This may not be a big policy issue this year, but in 2016 it will be huge."
Unveiled in 2009 by an unidentified programmer, or group of programmers, under the name Satoshi Nakamoto, bitcoin has grown in popularity - and volatility - in the last two years. Supply is capped at 21 million bitcoins, and a software algorithm controls the flow of the cryptocurrency instead of a monetary authority.
Risk-averse politicians have kept their distance, but bitcoin has found fans on the far left and the far right. Some liberals view it as a way to help low-income constituents avoid usurious bank fees. Some conservatives see it as a way to get the government out of monetary policy.
Aside from Newsom, Democrats like Oakland mayoral candidate Bryan Parker and Colorado Rep. Jared Polis, and Republicans like Texas attorney general and gubernatorial candidate Greg Abbott now accept bitcoin contributions.
Their common challenge: Explaining bitcoin.
"I came from a place of absolute confusion and cynicism on bitcoin," Newsom, the former San Francisco mayor, said. "If anybody started talking about cryptocurrency, I'd start rolling my eyes and yawning and going, 'Give me a break.' Now I find it fascinating.
"But how the hell do I explain it to anybody?" said Newsom, who was swayed by people like top Silicon Valley venture capitalist Marc Andreessen - an investor who has put more than $50 million in bitcoin-related startups.
Bitcoin has support from liberals and libertarians, but it remains a cause of confusion. The nonpartisan Sunlight Foundation, which analyzes the role of money in politics, doesn't yet have a policy statement on cryptocurrencies.
This month the Federal Elections Commission took its most definitive stand on the issue, issuing an advisory opinion that said politicians could accept bitcoin donations - up to $100. Before depositing them into a campaign account, an organization must exchange the bitcoins for U.S. currency. But the commissioners remain divided on the larger meaning of the advisory opinion.
FEC Chairman Lee Goodman wrote that it meant that bitcoin should be "regulated like in-kind contributions. So the commission effectively took the same position that the IRS has taken, that bitcoins are in kind property; they are not U.S. currency." Treating bitcoin donations in that way would limit individuals to giving $2,600 to a candidate per election and $5,000 to a PAC.
FEC vice chair Ann Ravel disagreed, writing that the commission's reservations seem to stem largely from perceived concerns about the current technical difficulty in tracing bitcoins.
"Unlike checks or credit cards, bitcoins are not associated with a depository institution, which means that they cannot be traced or verified through standard audit mechanisms, such as account records," Ravel wrote.
But cryptocurrency supporters like Brad Stephens, a San Franciscan who donated $6,800 in bitcoin to Newsom's campaign, says bitcoin is far less anonymous than regulators believe due to the block chain, or permanent record, updated each time a bitcoin is traded.
Still, regulators are wary.
When asked if bitcoin contributions to Newsom's campaign were legal, California Fair Political Practices Commission spokesman Jay Wierenga said, "They are not prohibited, but we recommend against it at this time because we want to ensure that the true donors are identified and disclosed.
"We're continuing to evaluate the issue as new decisions, facts and technology develop."
That was enough of a green light for Newsom's campaign.
"The way we read it is that the door is not closed," Newsom said.
Newsom's campaign staff pleaded with him for months not to take a public stand on bitcoin. But he said if he was going to preach disruption, then "I should promote the technology ever so subtly by saying I'll accept bitcoin in the campaign - until they tell me it's a terrible idea. And if they say stop it, we'll stop it."
"My chin is right out there, for people to say, 'This guy is a nut. What's he doing?' " Newsom said and laughed. "It's been there before. I'm ready for it."
©2014 the San Francisco Chronicle