UK Proposes Ban on Political Donations in Cryptocurrency Due to Traceability and Foreign Interference Concerns
As many countries like the United States begin to view cryptocurrency as a new campaign fundraising tool, the UK government is showing a cautious stance, with ministers warning about risks associated with accepting crypto donations, including a proposal to completely ban this form of contribution.
In a statement on July 16, Pat McFadden – the UK Cabinet Office Minister – argued that there are sufficient grounds to consider banning political donations in cryptocurrency due to the difficult-to-trace nature of these assets. Responding to a question from Labour Party MP Liam Byrne, McFadden emphasized that laws need to be continuously updated to ensure transparency and public trust in political funding.
He said: "Funding democracy has always been a controversial topic. But it's important that we clearly know who is donating, whether they are legally registered, and what the background of that donation is. This is a very valid question to ask".
In contrast to the situation in the US – where politicians like former President Donald Trump openly support the digital asset sector and accept crypto donations – the UK is increasingly tightening regulations related to cryptocurrency in political activities. This difference highlights the increasingly divergent approaches between countries regarding the relationship between crypto and democracy.
Both McFadden and Byrne believe the government should increase budgets for the National Crime Agency (NCA) and the UK Electoral Commission to handle potential risks from crypto donations.
The parliamentary debate occurred just two months after Nigel Farage's Reform UK Party declared itself the first political party in the country to accept political donations in Bitcoin. However, this move raised concerns among legislators and anti-corruption organizations.
A recent report from a non-profit organization specializing in corruption monitoring in the UK warns that allowing cryptocurrency donations could increase the risk of foreign entities or capital linked to crime infiltrating the UK political system. The report emphasizes that cryptocurrency could be a tool for future political interference plans.
Not only the United Kingdom, but many other countries have also taken strong actions to limit crypto's impact on politics. In 2022, Ireland completely banned political donations in cryptocurrency to protect democracy from foreign intervention elements. The legal amendments in Ireland also include provisions against misinformation, political funding transparency, and control of foreign donation sources.
In the United States, some states like Oregon, Michigan, and North Carolina have also banned campaign donations in cryptocurrency due to concerns about traceability, financial transparency, and election law compliance. Previously, California had issued a similar ban in 2018 but revoked it in 2022.
In contrast, El Salvador – the first country in the world to recognize Bitcoin as legal tender – imposes no restrictions on crypto donations. However, in 2022, the civil organization Acción Ciudadana warned that the lack of transparency in political funding in the country, combined with Bitcoin recognition, could make criminal groups or foreign forces easily interfere in elections through anonymous donations.
In the context of increasing global political donations in cryptocurrency, legislators continue to face legal gaps created by digital assets. In the 2024 US election alone, crypto companies have spent a total of 134 million USD to support crypto-friendly candidates – a figure reflecting both the power and concerns about crypto's growing influence on modern politics.
