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Popular digital currency bitcoin can be used for political contributions in the US - but with limits.

The US Federal Election Commission unanimously approved political donations in bitcoin, but limited donations to $100 per donor per election cycle.

Recipients must convert bitcoins into US dollars, and they are not allowed to use the digital currency to pay for goods and services.

The identity of the donor has to be revealed. Bitcoin's popularity as an alternative transaction method was partly due to its anonymity.

"The initial receipt of bitcoins as contributions, regardless of subsequent disposition, should be reported like in-kind contributions," the commission said in a report.

"Like securities that a political committee may receive into and hold in a brokerage account, bitcoins may be received into and held in a bitcoin wallet until the committee liquidates them."

The decision comes after Make Your Laws (MYL), an organisation that facilitates political contributions, proposed the commission to accept individual bitcoin donations. It is issued as guidance and not as new regulations.

Regarding sale and disbursements of bitcoins, the commission concluded that a campaign or a political action committee may purchase bitcoin for investment purposes, but they cannot be disbursed.

In order to disburse, bitcoins should be sold and the proceeds should be placed in a campaign depository.

A number of politicians and political campaigns in the US said that they are ready to accept donations in bitcoins.

Texas Attorney General Greg Abbott started accepting bitcoin donations in April, treating them as contributions in-kind. Other federal lawmakers, such as Representative Steve Stockman, have also welcomed bitcoin donations, CoinDesk reports.

Bitcoin has steadily been gaining in popularity despite the volatility in its value. The virtual currency exists as software and is not backed by any country or banking authority.

It was launched in 2008 and is traded within a global network of computers. They can be transferred without going through banks or clearing houses, reducing fees involved in the services significantly.

The number of businesses adopting the cryptocurrency for payments to make use of its advantages is increasing day by day.

Nevertheless, critics say bitcoins could be used for drug transactions, money-laundering and other illegal activities due to the near anonymity of those who deal with them.