The ministers of the British government are sounding the alarm about cryptocurrency as a possible vehicle to launder foreign money, pay bribes, and finance political campaigns. They call it an existential threat to the country’s democracy.
Cabinet Office Minister Pat McFadden said there is a strong case for making crypto donations illegal in the UK. He was responding to Labor MP Liam Byrne, who had asked if the government was reviewing a crypto ban in political funding, which was ordered during the Beitbridge inquiry into xenophobia.
During Parliament’s summer recess, McFadden emphasized the need for the UK to update its political finance laws to preserve public trust continuously. He said it was important to know who the donation was received from, whether it was correctly registered, and to understand the entire path of money in and out to assure the donation was safe.
The concern is that cryptocurrencies such as Bitcoin and Ethereum can move across borders without being attached to names, banks, or identities. That is the tricky part for officials when trying to track the trail of money and verify that it is the source of the donation.
To one set of people, crypto is a clear-eyed modern method of raising money; to another, it is a potential opening into the shadowy and potentially illicit world of campaign finance.
Reform UK Bitcoin move sparks outrage
It is just two months since Reform UK, led by Nigel Farage, said the party would begin taking donations in Bitcoin. The move made Reform UK the first UK political party to take donations in cryptocurrency publicly.
Although many have hailed it as a metric innovation, the regulators and watchdogs are worried about that.
A UK-registered anti-corruption charity warned in a recent report that accepting cryptocurrency donations could open up British politics to the dangers of foreign interference and the proceeds of crime.
The report said digital assets like crypto could be used in “future political interference schemes,” especially if combined with lax oversight.
McFadden and Byrne urged the government to ensure that institutions regulating political financing are strong. They called for greater resources and power for the National Crime Agency and the Electoral Commission, which monitors and investigates donations to political parties.
Governments tighten rules on crypto funding
It’s not just Britain that is worried. Elsewhere in the world, other countries are considering regulating or banning cryptocurrency donations to politics.
Like many democracies, Ireland aimed to shield its democracy from “foreign interference,” fake news, and clandestine campaign financing.
It’s different in the United States, state by state. A handful of states, including Oregon, Michigan, and North Carolina, have outlawed donations made in cryptocurrency altogether. They raised questions around traceability and transparency. Some states, like California, had bans in place but rolled back those restrictions so money from crypto could again flow into campaigns, as happened when the new year arrived.
However, in countries with weak oversight, the risks are even greater. For example, El Salvador, which made Bitcoin legal tender, permits political donations in cryptocurrency. Civic groups have cautioned that external forces can easily manipulate the democratic process anonymously.
