Downing Street has been urged to ban political donations in cryptocurrency by seven senior Labour MPs who chair parliamentary committees.
The committee chairs – Liam Byrne, Emily Thornberry, Tan Dhesi, Florence Eshalomi, Andy Slaughter, Chi Onwurah and Matt Western – called on the government to introduce a full ban in the forthcoming elections bill amid concern that cryptocurrency could be used by foreign states to influence politics.
Government sources told the Guardian last year that ministers are looking at ways to ban political donations made with cryptocurrency but the crackdown is not likely to be ready for the elections bill due early this year.
Byrne said the committee chairs are concerned political finance “must be transparent, traceable and enforceable” but crypto donations undermine all three.
“Crypto can obscure the true source of funds, enable thousands of micro donations below disclosure thresholds, and expose UK politics to foreign interference,” he said. “The Electoral Commission has warned that current technology makes these risks exceptionally hard to manage.
“Other democracies have already acted. The UK should not wait until a scandal forces our hand. This is not about opposing innovation. It is about protecting democracy with rules that work in the real world.”
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.
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.”
The Electoral Commission provides guidance on crypto donations but ministers accept any ban would probably have to come from the government through legislation.
Campaign groups have highlighted risks of 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 and make sure that the police are properly resourced to investigate it”.
“Crypto donations present real risks to our democracy,” she added. “We know that bad actors like Russia use crypto to undermine and interfere in democracies globally, while the difficulties involved in tracing the true source of transactions means that British voters may not know everyone who’s funding the parties they vote for.”