By Michael "Mehow" Popieszalsk, CEO of MatterFi

For the first time in a U.S. election, there's a major political candidate who is now accepting crypto donations.

Donald Trump's is wooing the crypto industry by repeatedly claiming he's in favor of digital assets — even claiming all remaining Bitcoin (CRYPTO: BTC) should be mined in America.

That's a pretty substantial U-turn for a man who, just a few short years ago, described BTC as a "scam" that was undermining the dollar. Despite that, the reception in the crypto community for Trump’s U-turn is positive.

It's understandable that many American crypto investors — and even some everyday consumers — might be tempted to donate some of their stack to his re-election campaign.

Indeed, blockchain analytics suggests that Trump's already received ETH (CRYPTO: ETH) and USDC (CRYPTO: USDC) worth at least $6 million through a single Base receive address in a few months.

But receiving contributions in this way can be exceedingly risky, and even a bad idea. Here's why.

Understanding the threats

The current security measures underpinning blockchains and cryptocurrencies are in desperate need of reform, with vulnerabilities that bring downsides for Trump and his supporters alike or any candidate collecting crypto.

One of the biggest for voters is the fact that their addresses are publicly exposed, meaning they could be tracked by political rivals as well as opportunistic criminals.

This could be solved by ensuring that every donor makes their contributions to a new private address and from a new private address, as initially envisioned by Bitcoin's pseudonymous inventor Satoshi Nakamoto.

However, given the tight regulations surrounding campaign finance, any change here would need to be accompanied by a cryptographic proof of identity to show donations are legal.

We've already seen some heavyweights in the crypto space fall afoul of federal laws when throwing their support behind the former president.

For example, Cameron and Tyler Winklevoss ended up receiving a total refund of $300,000 after donating $1 million each to Trump — a seven-figure sum that broke legal limits.

And with the currency mixer Tornado Cash now sanctioned in America, investors will now find it much harder to confidentially donate to politically sensitive causes they support.

In some countries, backing opposition candidates can come with huge ramifications — including jail time or even the loss of life.

Meanwhile, existing crypto infrastructure can also create some big headaches for the Republican nominee and his aides… especially when it comes to phishing attacks or poisoning campaign funds with “dirty crypto”. The latter is where malicious actors cause problems by sending stolen funds directly to Trump's official address, which could taint the entire wallet and lead to it being frozen.

Blockchain analytics would be required to isolate illicit coins — but this can take time, and there really isn't much of a provision for this in existing campaign finance laws.

It's also pretty impractical for larger donors, known as "whales" in the crypto community, to send funds under the radar because significant contributions are easy to trace.

Deep-pocketed individuals who pledge big sums to Trump could end up facing harassment and scrutiny from the crypto community and beyond.

The latest figures show the vast majority of transactions sent to Trump's wallet are under $100 in value, but 29 have been worth between $10,000 and $100,000.

Downsides for consumers

The risks are greater still for Trump supporters who have never interacted with cryptocurrencies before.

One analyst simulated what the experience would be for a beginner who's never set up a wallet or made a transfer before. The entire process took 45 minutes, which isn't very intuitive.

But even those who do know their way around the ecosystem — and have years of experience — can end up getting their fingers burned.

Cybercriminals can end up launching a slew of fake donation pages to mimic Trump's campaign, meaning unsuspecting consumers see their funds intercepted by thieves.

Other impracticalities also come to the fore. Right now, donors through the ex-president's official site need to complete Know Your Customer checks before completing their transaction.

But this then leaves the campaign's address exposed, meaning anyone can subsequently perform stealthy donations without going through the KYC process. Does that break campaign finance laws?

What's the answer?

As innovative as Trump has been during the 2024 race, it's reasonable to conclude embracing crypto donations has conjured up problems the campaign wouldn't have even dreamed of.

But there are ways of tackling them — and ensuring that politicians around the world can tap into new revenue streams as they drum up funds for their campaigns.

For example, an existing send to name technology eliminates the need to share wallet details, with funds sent to human-readable names rather than long, alphanumeric addresses.

Using @Trump2024 would be a no-brainer when compared with an indecipherable string of letters and numbers, reducing errors while making the flow of crypto easier to trace.

An additional layer of compliance is provided given how users can share a cryptographic proof of their identity, enabling campaigns to stay on the right side of the law.

There are other advantages, too. Third-party observers would be unable to see who has donated what, and malicious actors would be prevented from sending tainted funds.

By offering a user-friendly experience that's not too dissimilar to PayPal (NASDAQ:PYPL), send to name solution also makes it easier for novices to get involved by backing the candidates they believe in.

More than 50 countries around the world — home to half of the global population — are heading to the polls this year.

Crypto can ramp up political engagement and give voters a much louder voice.

But the potency and potential of digital assets as a donation method will only be realized if persistent issues that blunt their utility are dealt with first.