Transparency groups demand further curbs on party coffers

Political parties can still receive cash donations converted from digital ­currencies thanks to a loophole in the government’s ban on crypto donations. This method has already been utilised by Reform UK.

This week, ministers announced a moratorium on crypto and a £100,000 cap on donations from British citizens living abroad, in response to a review of foreign influence on domestic politics by former senior civil servant Philip Rycroft. Another 15 recommendations are being considered as the representation of the people bill goes through parliament.

The move has been welcomed by transparency campaigners and MPs concerned about the impact of allowing dark money to filter through the UK political system, amid concerns that it could be directed by hostile states and others acting in bad faith.

However, they warned that the ­current restrictions only address donations at the point of declaration rather than further “upstream” in the chain of transactions.

The Observer revealed last week that Reform was using a third party to convert crypto into cash before it reached the party coffers – experts say this is not prohibited by the current changes. As a result, the government is being urged to go further by bringing together people who work in crime, technology and electoral law to create a system that can spot crypto rather than a “regulatory line” which can be more easily avoided. One Labour MP praised the “ambition” of moves so far but added: “The bill won’t be worth the paper it’s written on [without] a requirement that you can’t convert into cash at an earlier stage in the funds’ journey.”

Eliza Lockhart, a research fellow at the Centre for Finance and Security at Rusi, added: “We have a window of opportunity that is rapidly closing. We need to seize this moment to make meaningful change to who is allowed to financially influence our politics. If we fail to address how funds may be obscured upstream or used to shape political discourse outside election periods, we risk missing the problem we are trying to solve.”

A Ministry of Housing, Communities and Local Government spokesperson said: “By banning the use of cryptocurrencies [in] political donations and introducing an overseas cap on donations, we are introducing tough safeguards to tackle foreign interference in our democracy.

A spokesperson for Reform said: “Starmer’s emergency changes to the law are an unprecedented attack on a political opponent who raises money perfectly legitimately. However, out of an abundance of caution, we have paused while we review our procedures.

“It’s worth saying: donations made through Reform’s crypto donation system are subject to compliance checks powered by a global KYC and AML platform used by major financial institutions. In addition to legal minimum requirements for political donations, Reform UK has voluntarily introduced enhanced verification for cumulative donations over £500, requiring government-issued photo ID and ­biometric selfie checks in real time.

“These measures go beyond what is typically required for standard political donations, and at the time we challenged the other parties to meet the same standard.”