Ministers are working to ban political donations made with cryptocurrency, but the crackdown is not likely to be ready for the elections bill in the new year, Whitehall sources have said. The government increasingly believes that donations made with cryptocurrency pose a risk to the integrity of the electoral system, not least because the source can be hard to verify.
However, the complex nature of cryptocurrency means officials do not believe a ban will be workable by the time of the elections bill, due to be published shortly, which is set to lower the voting age to 16 and reduce loopholes in political finance.
The government’s ambition to ban crypto donations will be a blow to Nigel Farage’s Reform UK party, which became the first to accept contributions in digital currency this year. It is believed to have received its first registrable donations in cryptocurrency this autumn and the party has set up its own crypto portal to receive contributions, saying it is subject to “enhanced” checks.
Government sources have said ministers believe cryptocurrency donations to be a problem, as they are difficult to trace and could be exploited by foreign powers or criminals. Pat McFadden, then a Cabinet Office minister, first raised the idea in July, saying: “I definitely think it is something that the Electoral Commission should be considering. I think that it’s very important that we know who is providing the donation, are they properly registered, what are the bona fides of that donation.”
Despite a push from some ministers for a ban on cryptocurrency donations, Vijay Rangarajan, the chief executive of the Electoral Commission, said in August he did not think a ban was necessary as there was already a huge responsibility on parties to be sure they knew the source of their donations. However, government sources said the watchdog had become increasingly concerned that it was difficult to check the origin and ownership of donations, particularly if a cryptocurrency wallet comes from abroad.
Campaign groups have highlighted risks with allowing donations in cryptocurrency. Susan Hawley, the executive director of Spotlight on Corruption, said the prospective ban was welcome but that the government must “come forward with a criminal offence that makes it much harder for foreign money to get into UK politics”. “Crypto donations present real risks to our democracy,” she added.
