Following recommendations made by the Rycroft Review, the government has announced a “complete and immediate ban” on crypto donations to UK political parties.
This is a measure that Spotlight on Corruption has long been calling for due to the risks that crypto donations pose of foreign interference and illicit finance undermining our democracy. The ban also follows the example set by countries such as Ireland and Brazil. And just days after the UK’s announcement, the Canadian government is throwing its weight behind a Strong and Free Elections Act to push through its own blanket ban on political crypto donations.
Canada has permitted political crypto donations since 2018. In 2022, Canada’s chief Electoral Officer, Stéphane Perrault, recommended tighter regulations on these donations but four years later changed his stance and advocated for a full ban. In an Elections Canada report published in 2024, Perrault observed that cryptocurrency “poses challenges in identifying a contributor” and “could be seen as a means by which unregulated resources could enter the federal political financing regime”.
However, the exact nature of the UK’s ban will not be clear until the government tables its own specific amendment to the Representation of the People Bill. As it could be a while before this is published when the Bill goes through its third reading stage, there is already speculation brewing over how comprehensive it will actually be.
Making the ban stick
The ban is a powerful first step to closing down some of the routes that malign overseas and domestic actors could use to influence our politics. But a nuanced approach to implementing it will be important.
The UK’s prohibition of political crypto donations has been styled as a ‘moratorium’ on the back of recommendations made by the Rycroft Review and the Joint Committee on the National Security Strategy. According to the government, this means that it won’t be overturned until “Parliament and the Electoral Commission are satisfied that the regulatory environment is robust enough”.
The Rycroft Review has called for a mechanism to be included in the Representation of the People Bill that could eventually lift the ban.
We are proposing that the only mechanism that would be free from executive interference would be for it to be repealed through primary legislation. Leaving this down to a statutory instrument would leave the door open to a future administration reversing the ban without any consultation, regulatory backstop or parliamentary process.
But it should always be a question of if, and not when, this should happen and there would be little use in even reopening the debate until the UK’s comprehensive regulatory framework around cryptoassets is fully introduced in October 2027 and given time to bed in.
How to mitigate the risks of political parties sidestepping the ban
a) Converting crypto to fiat before making a donation
It is unequivocal that the ban directly applies to arrangements used by parties such as the Homeland Party and the Other Party, who have tried to attract donations directly into their own crypto wallets.
However, the language we have seen so far from the government regarding the ban has not addressed the situation where crypto has been converted ‘upstream’ to fiat currency and ‘offramped’ from the blockchain before being donated.
From evidence that the Electoral Commission has given to parliamentary committees in recent months, we know that this has already been happening. The rise of crowdfunding platforms which allow crypto donations for political campaigns also raises some knotty regulatory questions.
In practice, it would be difficult to completely eliminate the practice of converting crypto to fiat before a donation is made, but there are ways to mitigate some of the risks it presents.
First and foremost, the government should stipulate that all political donations should be made from a UK bank account. The UK banking system is highly regulated and very adept at handling risk and detecting red flags in the flow of funds, including those that have been offramped from the blockchain.
Additionally, a requirement in the new Know Your Donor checks and donor declaration to ensure that any donations that originated from cryptocurrency have undergone full source of wealth checks, would add a double layer of protection.
b) Donating directly to crypto wallets owned by politicians
We know that some MPs and peers hold personal crypto holdings and wallets. Unless the government’s complete ban covers elected politicians, peers, candidates and election agents, this will expose a rather significant loophole.
Neither the code of conduct for the House of Commons or the House of Lords mentions anything about the declaration of cryptoassets owned by its members. However, Electoral Commission guidance does require individual politicians to declare crypto donations the receive in the same way as their fiat equivalents.
In the interests of beefing up the transparency mechanism around this, both codes of conduct should be updated to require MPs and peers to disclose their crypto investments in their register of interests.
c) Fundraising through the use of political affiliated memecoins
There is always a risk that UK political parties and politicians could decide to cash in on their own politically affiliated memecoins for fundraising purposes. The most famous example of this is the $TRUMP coin, launched by US President Donald Trump ahead of his 2024 inauguration.
The Electoral Commission’s chief executive has said in theory that “donations would be declarable for people who are buying” into political memecoins. However, in practice, this could be very challenging to regulate.
Unofficial political memecoins associated with Reform UK, Advance UK and individual politicians have all been created and circulated in recent years to limited success. But these foundations could usher in a situation where a political party or politician could profit from promoting, investing in and then selling a stake in a memecoin that is affiliated to them, but is owned by a third party.
It is currently unclear whether this method of fundraising would be subject to the current framework of rules around political donations. Therefore, the ban on crypto donations must also prohibit political parties and elected officials from holding a financial stake in any affiliated memecoin.
What actions have different political parties taken since the ban?
The Homeland Party has removed the option to donate crypto from its website, but has recommended that would-be donors contact its treasurer in case the ban is overturned in the future. As of 31st March, the Other Party, which has been largely inactive, is still soliciting donations made in crypto.
The largest of the three political parties impacted by the ban, Reform UK, has recently denied holding any of its own crypto wallets for direct donations. It has however previously accepted crypto donations made in Bitcoin, Ethereum, Solana and Tether through a third-party payment portal, provided by the Polish company, Radom.
Up until last week, anyone donating crypto to Reform through its website would be required to send it to one of Radom’s many intermediary crypto wallets for ID and permissibility checks. Following this, the donation would be mixed up in a Radom-owned wallet along with other deposits related to the company’s other customers, then ultimately ‘offramped’ or converted into fiat before being sent on to a Reform-owned bank accounts.
Since the government’s announcement of a ban, Reform has removed its crypto donation portal from its website. But as a party spokesperson told the Observer newspaper, this is only intended as a temporary measure while it reviews its procedures and separately considers legal action.
A visualisation of the crypto transactions flowing in and out of just one of Radom’s many intermediary wallet addresses used to process crypto donations to Reform UK. We have only been able to verify that one of the inflowing strands to this wallet is a political donation, the others could be related to Radom’s other clients. Credit: Arkham Intel
Third-party crypto payment processors and compliance with donations rules
Radom has previously confirmed that it requires proof of ID and a selfie at the point when a crypto donation is made to Reform UK. This information is processed by the compliance firm, SumSub, to conduct in depth ‘know your customer’ checks on the source of funds. Radom also says it has tools to detect when an individual fragments larger contributions into microdonations in an attempt to evade declaration and permissibility checks.
However, as Radom is regulated under the Polish VASP regime and not by the Financial Conduct Authority in the UK, the Electoral Commission has said it would be limited in its ability to obtain information from the company if it decided to probe the source of certain donations.
Moreover, as crypto donations to Reform go into intermediary wallets held by Radom and used by its other customers, it isn’t possible for the public to trace them via the blockchain without the disclosure of very specific information.
For now, it remains to be seen whether the government’s complete ban will also cover crypto donations made via third-party payment providers – as already proposed in an amendment tabled to the Representation of the People Bill by Liam Byrne MP.
The government managed to grab the headlines with is crypto donation ban, but now the devil will be in detail and we will be judging its effectiveness against three key tests:
- If it is enshrined in primary legislation
- How comprehensive it is and if it takes into account third-party payment providers and conversion from crypto to fiat
- If it is backed by a credible criminal deterrent
