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Ministers are introducing a temporary ban in cryptocurrency donations following an official review.
Philip Rycroft, a former senior civil servant, made the recommendation as part of a review into countering foreign financial influence and interference in UK politics.
Rycroft said the moratorium would allow regulators to catch up, although a full ban was not deemed necessary. Nonetheless, “there is a risk that crypto assets are used as a vehicle to channel in foreign money”, he said.
Are UK political parties allowed to receive cryptocurrency donations?
Donations of crypto assets – such as bitcoin, stablecoins and non-fungible tokens – to political parties are not illegal, although the moratorium will put these on hold. The Electoral Commission, the UK’s elections watchdog, has warned parties that the same verification procedures they must carry out for cash donations also apply to crypto, such as: checking that any donation over £500 is from a source allowed under UK law; returning a donation if the donor cannot be identified; reporting a donation or donations from a single source over the same calendar year if they exceed £11,180.
The commission says: “Because of the way [crypto assets] function, they present particular challenges and risks in meeting electoral law requirements in identifying donors and ensuring they are permissible.”
Rycroft has recommended that a temporary ban should apply to all levels of crypto donations and can be lifted once parliament and the commission are satisfied the new rules are effective.
Why are there concerns over crypto donations?
The Electoral Commission says crypto donors could, for instance, use “mixers” that obscure the true source of a donation or use an AI tool to split donations, which could evade reporting thresholds. Attempting to evade controls on donations is a criminal offence.
In March the joint committee on the national security strategy called for a ban on crypto donations, in order to “keep UK politics free from illicit finance”. It said such donations pose an “unnecessary and unacceptably high risk to the integrity of the political finance system”, reflecting wider fears about an asset class that has been linked to organised crime networks, money laundering and terror financing.
Cryptocurrencies such as bitcoin are not regulated, or issued, by central banks – unlike traditional currencies. This, according to critics and authorities, leaves them ripe for use by illicit organisations and individuals.
The committee added that “dirty” crypto funds could be converted into “clean” sterling and then donated to a party, in a scenario that underlines the difficulty of monitoring crypto’s use in UK politics.
How much crypto has been donated to UK political parties?
Because crypto assets are considered property, rather than a currency, they are treated as a non-monetary donation. So far, the Electoral Commission has not been notified of a crypto asset donation above the reporting threshold.
According to the anti-corruption charity Spotlight on Corruption, only three parties have said they will accept crypto donations: Reform UK, the far-right Homeland party and the Other party, which believes blockchain technology – a core component of cryptocurrencies – can enable “direct democracy” in the UK.
Homeland has received one donation to a cryptowallet worth approximately £27, according to a House of Commons briefing, while the Reform UK leader, Nigel Farage, has acknowledged the party has received crypto donations but they have not exceeded the £11,180 threshold.
In a letter to the joint committee on the national security strategy in February, the Electoral Commission said that “to date, no political party has reported any donations that they have identified as crypto assets”.
How does Reform UK receive cryptocurrency donations?
Crypto donations to Reform UK are accepted through a Polish payment platform called Radom, one of a host of infrastructure providers that allow businesses to handle transactions and to bank in cryptocurrency. While Farage has said that Reform has received multiple crypto donations, the party does not list donations made in digital currencies.
Evidence submitted to parliament from Spotlight on Corruption suggests that while Radom claims to follow UK rules around verifying the identity of Reform’s donors, it is not a UK business and would not face consequences were it to run afoul of UK election financing laws.
“As Radom is not answerable to a UK regulator, it would not face sanctions in the UK if it was found to have acted in breach of its political financing laws,” Spotlight on Corruption said.
