The UK government’s decision to implement a moratorium on donations made in cryptocurrencies following the recommendations of the Rycroft Review has prompted debate between those who think such a measure is heavy-handed, and those who argue it does not go far enough.

On one level, the question appears straightforward: should political parties be permitted to accept donations in crypto? In practice, however, this debate reflects a deeper issue. Crypto exposes structural weaknesses in a regime that remains focused on donations at the point of receipt, rather than the increasingly complex and transnational pathways through which political influence is now funded and exercised.

Foreign Financial Interference in UK Politics

Concerns about foreign financial interference in UK politics are no longer theoretical but real and persistent. The security alert issued by MI5 regarding the ‘political influence activities’ of Christine Lee, the dropped prosecution of a former parliamentary researcher for alleged Chinese espionage, the arrest of a Labour MP’s husband on related suspicions and the imprisonment of Nathan Gill for acting as a Russian agent all demonstrate the willingness of foreign actors to influence UK political discourse. The UK’s vulnerabilities against such efforts were further highlighted by the 2022 cyber-attack on the Electoral Commission, which allowed Chinese hackers to access the personal details of millions of voters.

A recent report by the Joint Committee on the National Security Strategy (JCNSS) paints a concerning picture of the UK’s ability to withstand foreign interference. The JCNSS concludes the UK’s political finance system is ‘too brittle, permissive, disjointed, slow, retrospective and underpowered to respond adequately’ to the evolving threat landscape. These findings reflect longstanding concerns that gaps in outdated electoral law, fragmented and under-resourced enforcement and the scalability of new technologies are enabling malign finance to present an increasingly pernicious and pervasive threat.

As foreign financial interference intensifies, the fault lines in the UK’s defences are becoming increasingly apparent.

It is against this backdrop the Rycroft Review has made its recommendations. As Rycroft notes, this is not the time to press the panic button, but alarm bells should be ringing loud and clear. As foreign financial interference intensifies, the fault lines in the UK’s defences are becoming increasingly apparent.

Crypto Ban vs Moratorium

One of Rycroft’s recommendations that has received the most attention is the introduction of a moratorium on political donations made in cryptocurrencies. A moratorium is a temporary prohibition, as opposed to a permanent ban, that can only be lifted once safeguards are in place. This has been criticised as both a weaker alternative to an outright ban and unnecessary overreach, given existing anti-money laundering (AML) regulations already impose requirements on UK-registered crypto-asset firms.

Both critiques focus on the direct use of crypto, that is, whether a political party should be able to accept donations in crypto. While these donations clearly pose security risks that must be managed, focusing solely on this point of receipt risks overlooking the more significant issue: how crypto can be used ‘upstream’ – across the transaction history of a donation – to obscure the origin of political funding. While blockchain technology records all movement of funds between crypto wallets, providing a level of transparency that often exceeds traditional transactions, it does not consistently establish who controls those wallets. This pseudonymity limits the ability of political parties and investigators to make reliable real-world attributions required to know the identity of the ultimate donor.

International examples, including the Romanian and Moldovan elections and the funding of sabotage operations across Europe, illustrate crypto can expand the ‘attack surface’ for foreign interference by facilitating the rapid and decentralised movement of funds across borders. Closer to home, recent reporting suggests crypto is already being routed through upstream intermediaries, before being converted into sterling and donated in cash to UK political parties. Where the donor is a ‘permissible donor’ under electoral law (such as an individual on the UK electoral register), these donations are currently lawful and would not be caught by a crypto ban.

There have long been concerns around shell companies and offshore structures being used to hide the true source of fiat donations. These concerns are exacerbated by the risks inherent in political parties essentially self-policing whether donations are permissible – in a 2024 test by investigative journalists, five out of six main UK parties accepted donations designed to circumvent foreign interference laws. In this sense, crypto adds new layers of complexity to existing risks, amplifying longstanding vulnerabilities and making it more difficult to establish the true origin of funds.

A permanent ban only addresses the most visible manifestation of this risk by removing crypto from the point of receipt. This approach reduces the impetus for further action, overlooking the fact that crypto is increasingly being integrated into mainstream financial services and enhanced regulatory frameworks will soon be online, including the Financial Conduct Authority’s 2027 regime for crypto-assets. Of greater concern is the fact that a permanent ban is considered by many as a solution in-and-of itself, creating a false sense of security as the more complex upstream risks continue to evolve and escalate without oversight.

A moratorium also manages immediate risks by prohibiting political parties from receiving donations in crypto but it is tied to regulatory improvement as the moratorium can only be lifted once Parliament and the Electoral Commission are assured an effective regulatory framework is in place. This creates a defined period in which to design a political finance regime capable of addressing how crypto may be used across the lifecycle of a donation. Crucially, this task must extend beyond the development of formal rules to include the technical expertise and institutional capacity required to enforce them.

The objective is not to achieve complete visibility across a global and decentralised crypto network – that would be impossible – but to close the gap between two regimes with overlapping but slightly different objectives: the AML regulation of crypto firms as financial service providers, which plays a critical role identifying suspicious activity related to the proceeds of crime, and the specific risks posed by the use of crypto to obscure foreign, but not necessarily criminal, sources of political funding. A framework tailored to meet this gap could build on existing controls and inform the strengthened ‘Know Your Donor’ checks Rycroft proposes, focusing on setting standards of traceability, identity and reporting, and excluding high-risk pathways.

Beyond Donations – the Wider Ecosystem of Influence

The debate over crypto donations reflects a deeper structural issue – the UK’s political finance framework is built on outdated assumptions about how money enters and influences politics. Much of the current regime, rooted in legislation from 2000, remains focused on regulating discrete, reportable donations made to political parties and campaigners during election periods. Yet modern foreign interference operations seek to create division and distrust of democratic processes across a far broader and more diffuse set of vectors.

Rycroft acknowledges it is beyond his remit to recommend root and branch reform of the UK’s political finance legislation to bring it into the 21st century (although he heavily hints it should be done). Regardless, his report makes clear the need to address both direct foreign interference via donations and the indirect shaping of political discourse by our adversaries and allies through a wider ecosystem of influence. Rycroft highlights growing concerns around undeclared sources of funding for the activities of lobbyists, think tanks and All Party Parliamentary Groups, particularly in relation to think tanks that are not subject to a consistent regulatory regime and are increasingly viewed by foreign actors as an effective conduit for opaque influence.

The debate over crypto donations reflects a deeper structural issue – the UK’s political finance framework is built on outdated assumptions about how money enters and influences politics.

If the government uses the moratorium as the catalyst to redefine how upstream political financial risks should be assessed, the same principles of traceability, verification and permissible funding pathways could be applied across this wider influence ecosystem. This provides an opportunity to move towards a more coherent and consistent approach to transparency, ensuring the same questions are asked of funding whether it shapes politics directly or indirectly.

A Narrowing Window of Opportunity

The Rycroft Review does not suggest the UK is facing an immediate crisis of democratic legitimacy. However, it warns this position will not hold unless decisive and substantial action is taken to counter intensifying foreign threats. Public confidence in political finance is already under strain and emerging technologies continue to expand the range of tools available to those seeking to exert undue financial influence.

The introduction of a moratorium on crypto donations should be understood as an important starting point. It recognises the current framework is not yet equipped to manage these threats and creates a window in which to design one that is. The effectiveness of this approach will ultimately depend on how that narrowing window of opportunity is used.

If the government is serious about future proofing the UK’s democracy, it must use this moment to close the gap between how political finance is regulated on paper and how foreign inference operates in practice.

© RUSI, 2026.

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