UK moves to curb crypto funding in politics

Moves to prohibit political donations made in cryptocurrency are gathering pace at Westminster, as lawmakers warn that digital assets could be exploited by hostile states and anonymous actors to influence elections and undermine democratic safeguards.

Cross-party concern has sharpened following intelligence assessments that flagged the vulnerability of political finance rules to opaque funding channels. Legislators argue that while donations in cash and traditional banking systems are subject to disclosure and oversight, cryptocurrencies can obscure the true source of funds, complicating efforts to detect foreign interference.

The issue has been raised in parliamentary committees examining national security and electoral integrity, with senior figures calling for existing donation rules to be updated to reflect the growing use of digital assets. Under current law, political donations must come from permissible donors such as registered voters or UK-based companies, but enforcement relies heavily on traceability through regulated financial institutions.

Members of the UK Parliament say that framework is ill-equipped to deal with crypto wallets that can be created without robust identity checks and moved across borders in seconds. A senior lawmaker involved in the discussions said the concern was not about the size of crypto donations today, which remain marginal, but about the risk of a loophole being exploited during closely fought elections.

Warnings have also emerged from security officials. An intelligence report circulated to parliamentarians pointed to attempts by foreign actors to probe democratic systems using digital tools, including online disinformation campaigns and novel financing methods. While the report stopped short of naming cryptocurrencies as a direct channel already used for donations, it underlined the need for preventive regulation rather than reactive enforcement.

The Intelligence and Security Committee of Parliament has previously cautioned that hostile states are increasingly sophisticated in blending cyber techniques with financial methods to exert influence. Supporters of a ban argue that allowing crypto donations, even if disclosed, adds an unnecessary layer of complexity to oversight at a time when trust in political funding is already fragile.

Advocacy groups focused on electoral transparency have echoed those concerns. They argue that blockchain technology, often praised for its public ledger, does not automatically translate into clear accountability because wallet addresses do not reveal the identity of the individual or entity behind them. Tracing funds across multiple wallets and exchanges can require specialist expertise and international cooperation, slowing investigations.

Critics of an outright ban, including some figures in the digital asset sector, counter that cryptocurrencies are not inherently more opaque than other financial instruments and that regulated exchanges increasingly apply know-your-customer standards. They warn that prohibiting crypto donations could stifle innovation and push legitimate political engagement into less transparent channels.

However, regulators point out that political finance demands a higher bar than commercial transactions. The Electoral Commission has told lawmakers that its supervisory powers depend on clear audit trails and timely access to information, both of which can be harder to secure when donations are routed through decentralised networks or overseas platforms beyond UK jurisdiction.

The National Crime Agency has also been drawn into the debate, noting in briefings that digital assets have featured in money-laundering cases and sanctions evasion. While those cases do not directly involve political parties, officials argue the same techniques could be adapted to disguise prohibited donations.

Comparisons are being made with other democracies. Several European states have tightened controls on political funding from abroad, and some have moved to restrict or ban donations in non-traditional assets. In the United States, federal law requires crypto donations to be reported at their market value, but enforcement remains contested, and states have adopted divergent approaches.

At Westminster, proposals under discussion range from a full prohibition on accepting crypto donations to allowing them only through regulated intermediaries with stringent disclosure requirements. Supporters of the tougher option say a clear ban would remove ambiguity and reduce enforcement costs, while opponents favour adapting existing rules to cover new technologies.

Government ministers have so far avoided committing to a specific model, emphasising the need to balance innovation with security. A spokesperson said the government was examining the recommendations alongside broader reforms to electoral law and digital regulation, adding that protecting the integrity of elections remained a priority.