Cryptocurrency is reshaping global finance and, increasingly, international politics. What was once something that only happened abroad has reached British shores, with the first crypto donation to a UK political party reportedly made this month.

This marks a decisive shift in UK political finance, one that current laws and enforcement mechanisms are not equipped to handle. Unsurprisingly, a regulatory framework built for the analogue age cannot be expected to effectively secure democratic integrity in a digital one.

The government has recently announced welcome steps to strengthen transparency and security in political finance. Yet their plan to simply apply the same rules to cryptocurrency donations as those made in fiat money fails to recognise a fundamental reality – digital assets do not behave like cash.

The crypto blind spot

Unlike traditional money, cryptocurrencies are designed to be borderless, pseudonymous and decentralised. They can move across jurisdictions with minimal oversight and identifying the true origin of funds can be difficult. 

Even where transactions are traceable on a blockchain, attribution to real-world actors is rarely straightforward. This creates an environment ripe for misuse – from foreign interference and opaque funding flows to regulatory capture, where powerful crypto stakeholders shape the rules that govern them. 

International precedent shows how quickly these vulnerabilities can be exploited for malign purposes. In several countries, crypto donations have been used to obscure the origin of political contributions or test the boundaries of campaign finance law. 

Some jurisdictions, recognising these risks, have already moved to restrict or prohibit such donations. Others have taken a different view, arguing that with tech-savvy regulation, bitcoin could become a powerful tool for transparency and financial inclusion in politics.

One conclusion is clear – this is a complex and evolving issue that demands evidence-based research, not blind assumptions. That is why the Centre for Finance and Security (CFS) at RUSI, with support from the Joseph Rowntree Reform Trust, has launched a Cryptocurrencies in UK Politics project – an in-depth assessment of the democratic, security and transparency risks posed by cryptocurrency donations in the UK.

CFS will examine how digital assets could be used to obscure the source of political funding or exert undue influence on UK politics, assess whether existing and proposed regulatory regimes offer adequate protection, and develop targeted recommendations for reform.

Why this matters for democracy 

At its heart, political finance regulation is about trust – the public deserve to know who is funding their elected representatives. The arrival of cryptocurrency donations challenges that principle. Without updated regulation, it becomes harder to know whose money is shaping our politics, or whether domestic decision-making is being distorted by foreign or opaque influence.

This is not about rejecting innovation. Digital assets are here to stay and will undoubtedly play an increasingly determinative role in international economies. But innovation should not come at the expense of democratic resilience. A forward-looking, evidence-based regulatory approach can both support technological progress and protect the integrity of political life.

The UK has an opportunity to lead on this issue, setting a benchmark for political finance in the digital age. But that window is closing fast. If we fail to act, we risk embedding complacency into law and leaving open a blockchain backdoor that others will not hesitate to use.

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