National Security Committee Calls for Crypto Donation Ban to Prevent Foreign Interference
The chair of the national security committee has urged a ban on political donations made in cryptocurrency to prevent covert foreign interference in UK elections.
Matt Western, who leads the committee comprising MPs and peers, emphasized the need for a moratorium on crypto donations until the risks associated with such contributions are properly addressed, including thorough verification of the money's origin.
The committee also advocated for a review of sentencing guidelines for electoral offences, suggesting that stronger deterrents are necessary. Police have indicated that many covert surveillance techniques can only be employed for crimes punishable by at least three years in prison.
Western has written to Steve Reed, the cabinet minister responsible for electoral finance, urging immediate action after the new elections bill failed to include provisions restricting cryptocurrency donations.
Government Policy and Reform UK’s Crypto Donations
The government is currently reviewing its stance on crypto donations following Reform UK’s announcement earlier this year that it would accept digital currency contributions. The party reportedly received crypto donations last year and has established its own portal for such contributions, claiming to conduct "enhanced" checks.
In his correspondence, Western expressed concern that foreign state actors might intensify efforts to interfere in UK political finance ahead of the next election, given the deteriorating global security climate.
Fragmented Enforcement and Recommendation for Centralized Leadership
The committee highlighted the absence of a clear national enforcement authority for political finance and foreign interference risks. Responsibility is currently divided among the Electoral Commission, Metropolitan Police Service, counter-terror policing units, the National Crime Agency, MI5, and local police forces.
Western stated:
"This does not inspire confidence that risks are being investigated and mitigated in the most efficient and joined-up way."
He recommended appointing a single national police lead focused specifically on political finance and foreign interference risks.
Temporary Moratorium on Crypto Donations and Enhanced Safeguards
Regarding cryptocurrency, the committee acknowledged potential political sensitivities in restricting digital currency donations but maintained that:
"The bill should introduce a temporary moratorium on accepting crypto donations until the Electoral Commission produces statutory guidance."
Interim guidance should mandate that political parties only engage with cryptocurrency service providers registered with the Financial Conduct Authority, accept donations only when there is high confidence in the donor's identity, and reject contributions involving mechanisms that obscure the source of funds.
The committee also expressed concern that the bill’s "know your donor" provisions are insufficient. There appear to be inadequate requirements for donors to demonstrate the source of their wealth, raising the possibility that permissible corporate donors or individuals might act as conduits for foreign donations.
Western noted that data from the Electoral Commission indicates a tangible risk of foreign money entering the political finance system, even if the known instances remain low.
Government Considerations and Campaign Group Warnings
Government sources informed last year that ministers are exploring ways to ban political donations made via cryptocurrency, though such measures were not ready in time for inclusion in the elections bill expected earlier this year.
The Electoral Commission currently provides guidance on crypto donations, but ministers acknowledge that any ban would likely require government legislation.
Campaign groups have underscored the risks associated with allowing cryptocurrency donations. Tim Picton, senior advocacy adviser at Spotlight on Corruption, stated:
"Allowing crypto donations significantly increases the risk of illicit finance polluting our politics and foreign interference undermining our democracy.
With crypto, there is a range of tools available to malign actors looking to conceal the true source of a donation. The Electoral Commission and law enforcement face an uphill struggle trying to regulate against and contain this evolving threat.
A ban on crypto donations must be enshrined in the new Representation of the People Bill, to ensure it can’t be overturned in the future without a proper parliamentary process and extensive consultation with law enforcement agencies and the Electoral Commission."
Government Response and Independent Review
A spokesperson from the Ministry of Housing, Communities and Local Government commented:
"Through our Representation of the People bill we are fighting against the risk of foreign interference by strengthening rules around political donations.
We have also commissioned an independent review, led by former permanent secretary Philip Rycroft, to explore how we can go even further to toughen up the safeguards in place against illicit money from abroad – including cryptocurrencies."
