UK legislators call for a prompt halt on cryptocurrency contributions to political campaigns.

The committee emphasized the rapid transaction features of cryptocurrency, alongside instruments such as mixers, tumblers, and AI-facilitated segmentation of payments beneath the £500 reporting limit.

Parliamentarians called for a moratorium on crypto political donations (Ugur Akdemir/Unsplash, modified by CoinDesk)

What to know:

• A U.K. parliamentary committee requested an "immediate moratorium on crypto donations" to political parties, citing the "avoidable risk" they present to political finance and public confidence.
• The committee underscored the rapid transaction features of crypto, along with instruments such as mixers and AI-assisted division of payments below the minimum reporting threshold as contributing to the obfuscation of the origins of funds.
• The committee aims to have the moratorium included in the Representation of the People Bill and is advocating for the government to empower the Electoral Commission to require donor information from banks, HMRC, and crypto platforms to validate donors and prevent misuse.

A U.K. parliamentary committee urged the government to implement “an immediate moratorium on crypto donations” until Parliament ratifies Electoral Commission statutory guidance.

In a report, the Joint Committee on the National Security Strategy indicated that cryptocurrency poses an unnecessary risk to political finance and public trust. The committee stated that regulations should be established prior to the next general election.

The report pointed out that the same features that facilitate rapid payments in crypto also complicate monitoring efforts. It referenced mixers, tumblers, privacy coins, and chain hopping as mechanisms that can obscure the source of funds and cautioned that AI tools might assist in breaking down a large payment into several sub-£500 ($668) donations, each staying beneath the standard reporting threshold.

Crypto donations are still permissible in the country, even though cryptoassets are classified as property rather than legal tender, the report notes. Reform UK, the party headed by Nigel Farage that is leading in national polls, is the first European political party to announce it will accept crypto donations.

The total amount of crypto donations received by Reform UK thus far is unclear. Crypto investor Christopher Harbone has contributed approximately $12 million in cash to the party.

Natasha Powell, chief compliance officer at the crypto exchange Kraken, informed lawmakers that regulated exchanges can mitigate much of the associated risk. Nevertheless, the committee remained unconvinced and stated that the existing framework lacks the necessary tools and personnel to verify donors, trace funds, and prevent exploitation. Consequently, it seeks to have the moratorium included in the Representation of the People Bill.

The report adds that a prohibition on direct crypto gifts would not address every loophole. A donor could still convert cryptocurrencies into sterling before transferring funds through the banking system.

The committee also seeks to grant the Electoral Commission powers to demand information from banks, the tax authority, and crypto platforms when it suspects illicit activity, the report adds.

Earlier this year, senior Labour members of parliament called on Prime Minister Keir Starmer to prohibit cryptocurrency donations to political parties, expressing concerns that these could be exploited by hostile foreign entities to sway elections.