MADISON - Ethics officials are considering whether Wisconsin politicians can accept campaign contributions in bitcoin instead of dollars. 

If Wisconsin lets politicians receive donations in this electronic currency, the state would join the federal government, the District of Columbia and at least one other state in allowing this type of contribution. 

Any change would bring potential pitfalls for both politicians and the public — from the rapid shifts in bitcoin's market value to the way it makes its users untraceable. 

The state's Libertarian Party has asked the Wisconsin Ethics Commission to provide formal guidance on how to handle this new form of money, saying its growing popularity makes its eventual use inevitable. State Libertarian chairman Phil Anderson said his party and its candidates are already being offered donations in bitcoin.

"Cryptocurrencies, such as bitcoin, litecoin and ethereum, are more and more widely accepted as currency and as stores of value," Anderson wrote in a February letter to the Ethics Commission. 

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The six-member commission will hear from the public at its meeting Tuesday before deciding on whether to take some action on electronic currencies. The commission could potentially allow or prohibit bitcoin donations; ask for guidance from lawmakers or Attorney General Brad Schimel; or simply drop the issue.

A memo from staff to the commission offered no recommendation but did raise one potential red flag: bitcoin and its competitors can’t be traced by government officials in the same way that checks and credit card transactions can. Currently, campaigns can’t accept more than $100 in cash, which could provide a paper trail if ethics officials had to investigate a contribution.

Bitcoin, sometimes called cryptocurrency, is a digital asset that moves like cash through the internet, allowing users to buy goods and services or pay off debts without going through a bank or using government-sanctioned money like dollars. Bitcoin can be traded for dollars just like Euros or Mexican pesos, with one bitcoin currently trading for roughly $8,900.

The electronic currency contains within itself a kind of public ledger recording the transactions involving it but bitcoin is anonymous by design. The online identifying addresses used by bitcoin can’t be used to identify an individual using it the way a check can, the Ethics Commission memo reads.

Madison campaign finance attorney Mike Wittenwyler said state officials had already shown a preference for paper trails by prohibiting cash contributions of more than $100. Dealing in large amounts of cash or the equivalent of cash is seen as more prone to political corruption or at least the appearance of it, he said.

“I still don’t think you can get past the cash aspect,” he said.

In the past, donors to both GOP Gov. Scott Walker and then Democratic Gov. Jim Doyle have been charged with illegally funneling campaign contributions through family or associates to avoid state limits on donations by individuals. The campaigns were not found to have participated in either scheme.

In 2011, William Gardner, the head of Wisconsin & Southern Railroad Co., agreed to plead guilty to exceeding state contribution limits and giving money from himself and his company to employees and associates for them to contribute under their own names. Gardner directed the bulk of the money to Walker but some also went to Doyle. 

In 2008, Kenosha trucking magnate Dennis Troha was sentenced to six months of probation for a similar scheme in which he exceeded federal campaign donation limits by funneling political donations through family members. Troha, who unsuccessfully sought a Kenosha casino, was a large donor to Doyle, as well as Republicans.

Wittenwyler said he has some clients who have bitcoin but has never had any of them ask about donating to campaigns with the currency. He pointed out that bitcoin can already be easily converted to dollars and then donated.

If bitcoin are allowed, Wisconsin campaigns would still need to report the names and addresses of all contributors giving more than $10 and also the occupations for contributors giving more than $200. 

The Federal Elections Commission allows federal candidates to accept bitcoin contributions in much the same way that campaigns can accept other gifts such as the use of a restaurant for a fundraiser, according to the memo to Wisconsin ethics commissioners.

Montana and Washington, D.C., have similar policies, the memo reads. Montana requires campaigns to promptly convert bitcoin to dollars and prohibits candidates from buying anything with bitcoin directly.

If bitcoin were allowed in Wisconsin, candidates and contributors would have to pay attention to its big swings in value against the U.S. dollar. Forbes reported Monday, for instance, that the value of bitcoin has risen 27% since the beginning of the month.

Those large swings could make it difficult for contributors to stay within state contribution limits such as the $20,000 cap on individual donations to candidates for governor. A bitcoin donation worth $19,000 at the time of the contribution might be worth $22,000 a week later, putting the contributor over the state limit.

The campaign would then have to take some action such as returning the excess contribution to the donor.

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