Cryptocurrencies have to keep outside of the purview of Japan’s stringent election funding law, which states that donations to individual candidates in yen or through stocks, bonds, etc. have to be reported either by the donor or the candidate receiving it. Japan’s Ministry of Internal Affairs and Communications has stated that individual candidates do not have to report the amount or source of any funding they receive in cryptocurrencies.
This news would ideally see as leveling the field for fresh candidates as well as for people who don’t have deep pockets. Surely, cryptocurrency users would rejoice as they can now support their favorite candidates without going through the cumbersome process of reporting it to the government and candidates can take multiple small donations in digital currency without having to employ people to record every transaction and submit the voluminous records to the government for clearance. Small donations in fiat currency were banned as political parties were hiding large contributions by corporations by recording them as multiple small contributions. They were not required to keep any record of donors, as it would be too tedious. Thus, they could escape the law using this loophole.
Such accounting creativity is not possible in cryptocurrencies where each transaction, whether small or big, by a user, is recorded in immutable blocks, which are validated in a decentralized manner.
Still, several experts have voiced concerns over this move. In their opinion, cryptocurrency being a currency should be subject to regulations, and relevant law should amend for this. In a strange situation, cryptocurrency is taxable in Japan. So, not reporting crypto transactions will hamper tax collection as the government would not be able to track the transfer of digital assets. If it is taxable, then surely government departments are keeping track of digital transactions in other spheres of an individual’s life. Then, it makes little sense to keep election funding out of the purview of such monitoring, especially when tools for such monitoring are already available to government agencies.
In this scenario, large corporations or hedge funds may transfer huge sums of cryptocurrency to their preferred candidates and will not even have to report it. They will not have to maintain a record of their contributions or may be allowed to keep a partial record showing the amount contributed but not the candidate it was given to. The ramifications of this can be enormous. All the good work done till now in keeping election funding clean would go down the drain. Laws specifying limits on individual digital contributions as well as a limit on a maximum number of contributions per individual would be needed to control this.
Thus, it would be interesting to see whether cryptocurrencies end up leveling the playing field or skewing it.