UK Panel Calls Crypto Donations ‘High Risk,’ Seeks Immediate Ban

A British parliamentary committee has urged an immediate ban on crypto donations to political parties, but at least one industry expert warns the move could backfire and create new cybersecurity risks, even as lawmakers try to curb foreign influence.

The warning comes as the Joint Committee on National Security Strategy (JCNSS) shouted in his last report for a binding moratorium on crypto donations, describing them as an “unnecessarily and unacceptably high risk to the integrity of the political financial system.”

The cross-party panel said the government should amend the Representation of the People Bill, which enters committee stage on Wednesday, to ban such donations until stronger safeguards are in place.

The report is part of a wider effort to tighten political finance rules ahead of the next general election, amid growing concerns about illegal financing and foreign interference in British politics.

“Few things are more important than maintaining confidence in our politics. The widespread idea that politicians can be ‘bought’ with foreign money is becoming increasingly aggressive,” Joint Committee on National Security Strategy chairman Matt Western MP said in a statement statement.

“The government should immediately ban political donations via crypto until strong regulations can be developed,” the committee said, warning that “the perception that foreign money is shaping politics is becoming increasingly corrosive.”

Problems at hand

“The only thing that stricter donor KYC rules or an outright ban will do is introduce new crypto vulnerabilities by forcing political parties to keep personal data… in centralized databases,” Kadan Stadelmann, founder of Komodo Blockchain and cybersecurity expert, told me. Declutter.

“This creates a huge honey pot that Britain’s adversaries would drool over,” he added.

Stadelmann pointed to the breach of US President Donald Trump’s campaign servers in 2024 and the hacks of Hillary Clinton and the DNC in 2016 as precedents.

“This proposed ‘solution’ would be the envy of ransomware hackers and other nefarious online actors,” he said, noting that only “a truly decentralized architecture secured by cryptography” could achieve parliament’s stated goal.

Evidence presented to the committee also highlighted how crypto instruments, such as mixers, privacy coinsand cross-chain swaps could obscure the origins of funds, while AI could enable automated ‘micro-donations’, which are large donations in numerous transfers of less than £500, each below the reporting threshold under existing electoral law.

In its report, the committee heard expert views, with Ian Taylor, governance advisor at CryptoUK, saying crypto can be transparent within regulated systems, while Tom Keatinge, director of RUSI’s Center for Finance and Security, warned that a ban could push activity abroad without addressing the underlying risks.

The report concluded that while crypto can provide transparency and traceability, current supervision is inadequate and warns that “the opportunity to avoid regulations is too great.”

Last year, Reform UK, the only major British party to accept crypto donations since June last year, attracted attention after receiving a record $12 million (£9 million). donation from Tether-linked investor Christopher Harborne, give rise to research requests from the Liberal Democrats and Labour, who also contacted the Financial Conduct Authority.

Earlier this month, Labor MP Rushanara Ali said called crypto donations a vector for “foreign interference in our democracy,” citing tactics such as micro-donations and the use of multiple wallets to circumvent disclosure rules.