Urgent Call for Temporary Ban on Cryptocurrency Political Donations
The chair of the national security committee has issued a stark warning about the vulnerability of British elections to foreign interference through cryptocurrency donations. Matt Western, leading the committee of MPs and peers, has called for an immediate temporary moratorium on political contributions made in digital currency until comprehensive safeguards can be established.
Growing Threat of Foreign Interference
The committee expressed deep concern that foreign state intent to interfere in UK political finance may intensify ahead of the next general election, particularly given the deteriorating global security environment. Western emphasized that without adequate checks on the source of cryptocurrency funds, the electoral system remains dangerously exposed to covert foreign money.
In a letter to Steve Reed, the cabinet minister responsible for electoral finance, Western highlighted that the recent elections bill failed to include necessary restrictions on cryptocurrency donations. This oversight comes despite growing evidence that digital currencies could be exploited to conceal the true origins of political contributions.
Inadequate Current Safeguards
The committee raised serious questions about the fragmented enforcement system for political finance and foreign interference risks. Responsibility is currently divided among multiple agencies including the Electoral Commission, Metropolitan Police, counter-terror policing, National Crime Agency, MI5, and local police forces.
"This does not inspire confidence that risks are being investigated and mitigated in the most efficient and joined-up way," Western stated, recommending the creation of a single national police lead specifically focused on political finance with emphasis on foreign interference threats.
Reform UK's Crypto Acceptance
The government's consideration of cryptocurrency donation policy follows Reform UK becoming the first political party to announce acceptance of contributions in digital currency earlier this year. The party is believed to have received its first registrable cryptocurrency donations last year and has established a dedicated crypto portal for contributions, claiming to implement "enhanced" verification checks.
However, the committee noted there would be "political sensitivities" around restricting cryptocurrency donations, particularly as some politicians have expressed support for digital currencies.
Proposed Interim Measures
Western outlined several critical interim requirements that should be implemented immediately:
- Political parties should only use cryptocurrency service providers registered with the Financial Conduct Authority
- Donations should only be accepted when there is high confidence in identifying the ultimate source of funds
- Contributions should be rejected when mechanisms obscure the true origin of funds
The committee also expressed concerns that proposed "know your donor" checks in the elections bill do not go far enough, particularly regarding requirements for donors to demonstrate their source of wealth.
Campaign Group Warnings
Anti-corruption organizations have echoed the committee's concerns. Tim Picton, senior advocacy adviser at Spotlight on Corruption, warned: "Allowing crypto donations significantly increases the risk of illicit finance polluting our politics and foreign interference undermining our democracy."
Picton emphasized that cryptocurrency provides numerous tools for malicious actors to conceal donation sources, creating significant challenges for regulators and law enforcement agencies attempting to monitor and control this evolving threat.
Government Response and Independent Review
A Ministry of Housing, Communities and Local Government spokesperson responded: "Through our Representation of the People bill we are fighting against the risk of foreign interference by strengthening rules around political donations."
The government has commissioned an independent review led by former permanent secretary Philip Rycroft to explore additional measures for preventing illicit foreign money from entering the political system, including specific examination of cryptocurrency risks.
Sentencing Review for Electoral Offences
Beyond cryptocurrency concerns, the committee called for a comprehensive review of sentences for electoral offences, suggesting stronger deterrents are needed. Police have highlighted that many covert surveillance measures can only be deployed for crimes carrying minimum three-year prison sentences, creating potential enforcement limitations.
Western noted that Electoral Commission data suggests the risk of foreign money entering the political system is genuine, even if current known instances remain relatively limited in proportion to overall political financing.
