To maintain transparency in democracy, now big countries of the world are banning the use of digital assets like Bitcoin in election funding. Recently Britain had banned it and now the Canadian government has also followed the same path and taken a very strict step. On March 26, Bill C-25 (Strong and Free Elections Act) was introduced in the Parliament of Canada, the direct objective of which is to completely stop the entry of hidden money in electoral politics.
What is the reason for the ban on crypto in election donations?
This new bill of Canada will ban not only Bitcoin, but also all types of crypto assets, money orders and prepaid payment cards. In fact, the biggest feature of cryptocurrency has become the biggest challenge for the elections. Tracing crypto transactions, i.e. finding out where the money originally came from, is technically quite difficult. By taking advantage of this loophole, foreign powers or unknown people can easily fund political parties. The UK government also immediately banned crypto funding, arguing that digital assets could be used to hide the source of foreign money. This new ban of Canada will apply to the entire political structure, which will include political parties, candidates and even third-party agencies doing election campaigning.
Permission was given since 2019, so why changed the decision now?
Interestingly, in Canada, crypto donations for elections were approved as an ‘asset’ (non-monetary contributions) since 2019. At that time some rules were also decided for this. For example, donors did not get any tax exemption on this, which donors usually get in traditional donations. Apart from this, only those cryptocurrencies whose blockchain is public could be taken as donations. Privacy coins like Monero, which completely hide the identity of the donor, were already excluded from the system. Also, candidates were required to convert this crypto donation into fiat currency (Canadian dollars) before spending it. However, despite this exemption, no major political party has publicly accepted taking donations in crypto in the elections of 2021 and 2025.
Old rules started weakening
The biggest strength of any fair election is its transparency. There was a rule in the 2019 framework that if a person donates more than $200 worth of crypto, he would have to make his name and address public. But election officials were continuously seeing flaws in this system. Following the election results in June 2022, Canada’s Chief Electoral Officer (CEO) recommended further tightening of the rules. Their demand was that the rule of secret donation of $200 or less should be completely abolished. However, with time it became clear that it is very difficult to implement these rules at the ground level. By November 2024, the Chief Electoral Officer came to the conclusion that accurately identifying crypto donors is complex in principle. For this reason, instead of making the rules stricter, it has been decided to abolish this entire system.