UK Lawmakers Call for Total Ban on Crypto Donations to Political Parties Amid Transparency Concerns
The UK is once again at the center of a heated debate over the role of cryptocurrencies in politics. On January 11, 2026, the chairs of seven parliamentary committees submitted a joint letter urging the government to consider a total ban on cryptocurrency donations to political parties. This bold move reignited concerns around transparency and foreign influence in election financing. Lawmakers warn that crypto donations threaten transparency and traceability. Liam Byrne, chair of the Business and Energy Committee, emphasized that crypto can obscure the real source of funds, enable small fragmented donations to dodge disclosure rules, and expose British politics to foreign interference. The letter also highlights how modern technology makes regulatory enforcement much harder.
Labour and Ministers Acknowledge the Risks – But Legal Action Still Lacking The idea of banning crypto donations isn’t new. Back in July 2025, Labour’s Patrick McFadden admitted the government was already evaluating the issue. Now, however, pressure is mounting, with cross-party officials raising alarms about threats to election integrity. Several UK ministers agree the risks are real — particularly around tracking crypto origins — but admit that technical and legal complexities could prevent the ban from being included in the upcoming Electoral Law package.
Reform UK Under Fire After £9M Crypto Donation from Tether Investor Tensions peaked in December 2025 when the Electoral Commission revealed that Reform UK had accepted a crypto-linked donation worth £9 million (around $12 million) from crypto investor Christopher Harborne, who owns a 12% stake in Tether. Although the donation itself was reportedly made in fiat currency, its origin raised serious questions. Both the Labour Party and Liberal Democrats launched internal investigations into whether the gift breached any political finance laws.
Crypto Donations Under Scrutiny as UK Develops Broader Regulatory Framework The controversy comes as the UK works to establish a comprehensive crypto regulatory regime. In December, Parliament passed a law recognizing cryptocurrencies as property, and the government aims to regulate digital assets like traditional financial instruments by 2027. Lawmakers now warn that crypto donations could be used to bypass transparency rules and erode public trust. The push for a total ban shows just how seriously British officials are taking the intersection of technology, politics, and democracy.
Summary As the UK shapes its crypto rules, the proposal to ban all political crypto donations underscores the growing unease around digital assets and election integrity. With public pressure rising, the coming months may prove pivotal for how Britain handles this modern political risk.
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Illicit Crypto in 2025: A Record-Breaking $158 Billion
According to the latest 2026 Crypto Crime Report from TRM Labs, illegal crypto activity reached a staggering $158 billion in 2025, up 145% from the $64.5 billion recorded in 2024. This marks a new all-time high in illicit blockchain flows. TRM noted that this dramatic rebound came after years of steady decline. From $85.9 billion in 2021, criminal crypto volumes dropped to $73.3 billion by 2023 — only to skyrocket again in 2025.
The Paradox: More Crime in Dollars, Less Crime in Percentage TRM’s data reveals a twist: the percentage of illegal activity is actually shrinking. In 2025, illicit transactions made up just 1.5% of known crypto flows, down from 1.7% in 2024 and 3.5% in 2023. Likewise, only 2.7% of inbound funds went into flagged wallets, compared to 2.9% the year before and 6.0% in 2023. This means the market is growing faster than the criminals — but they’re still handling more money than ever before in raw numbers.
Russia Leads the Way — One Token Alone Moved $72 Billion TRM identified Russia-linked addresses as the dominant players in the 2025 illicit crypto ecosystem.
🔹 Token A757 processed $72 billion in dirty money
🔹 Wallet cluster A7 received an additional $39 billion Combined, they accounted for over 80% of all sanction-related volume. Key actors include Garantex, Grinex, and the A7 network, with a spotlight on a ruble-backed stablecoin called A7A5. According to TRM, this token is central to Russia’s long-term strategy to reduce reliance on the U.S. dollar and build an independent payment infrastructure.
Stablecoins Take Over — Criminals Are Getting Smarter TRM found that 95% of all funds entering sanctioned wallets came through stablecoins — a clear sign of tactical adaptation. Today’s bad actors avoid major exchanges and instead use smaller, riskier platforms, private deals, and stealthy transaction tools.
In fact:
🔹 In 2020, this type of off-chain service moved about $123 million
🔹 By 2025, that number ballooned to over $103 billion They now rely on OTC brokers, underground banking networks, Asian crypto casinos, and money mules to move huge sums of stablecoins into the regulated financial system.
Venezuela, China, and the Darknet — Where the Dirty Money Goes TRM also highlighted cases where governments themselves use crypto to bypass sanctions.
🔹 In Venezuela, authorities reportedly rely on crypto to keep state functions running, from payroll to remittances — because banks are frozen.
🔹 In China, underground escrow services support fraud, money laundering, and cybercrime with little oversight. Meanwhile, darknet markets for illegal goods and services grew by 20% year-over-year.
Enforcement Gets Faster — and TRM Updates Its Tracking Model TRM emphasized that the spike in identified crime is not due to smarter criminals, but to faster enforcement. The Beacon Network, a collaborative international platform, now lets investigators cross-reference wallets, transactions, and patterns in real time. The result: dirty wallets are flagged much faster. Even stablecoin issuers have joined the effort. TRM notes that Tether has actively blocked wallets tied to terrorism, fraud, and hacking, which explains the surge in flagged stablecoin transactions.
New Methodology: Real Risk vs. Fake Volume TRM has also changed how it measures risk. Previously, illegal crypto was calculated against total blockchain volume, but that included bots, wash trades, and internal exchange shuffling — inflating the numbers and hiding the truth. Now, TRM compares illicit flows only to real, usable capital — money entering or exiting licensed VASPs (crypto exchanges, payment providers, etc.).
This shows the true criminal exposure — how much real money ends up in bad actors' hands. They also removed:
🔹 Wash trading
🔹 Peel chains
🔹 Internal wallet loops These activities create false movement without adding capital. They're now filtered out of the dataset.
$158 Billion May Just Be the Beginning TRM calls its numbers conservative estimates. The report excludes:
🔹 Fiat crimes that later entered crypto
🔹 Unaudited or off-chain wallets
🔹 Full money laundering cycles Moreover, investigations are ongoing. As more wallets are unmasked and sanctions updated, the real number could rise significantly. Their final warning:
➡ Crypto crime is no longer a fringe issue. It's a fast-evolving, globally scaled threat.
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Coinbase Threatens to Withdraw Support for Crypto Bill Over Stablecoin Rewards
U.S.-based crypto exchange Coinbase is heading toward a direct confrontation with lawmakers. If the new crypto legislation restricts its ability to pay rewards to customers holding stablecoins, the company is threatening to withdraw its support for the bill entirely. That could derail or delay one of the most significant regulatory efforts for digital assets in the country. The bill — expected to be unveiled Monday and debated Thursday in a Senate committee — aims to set clear rules for digital assets. But Coinbase insists that the regulation of rewards should be limited to transparency requirements, not outright bans or heavy restrictions.
Banks Want Limits — Coinbase Defends Open Market Competition The draft bill includes proposals that would allow only licensed financial institutions to offer interest or yield on stablecoins, a move strongly supported by traditional banks. They argue that rewards offered by crypto exchanges draw deposits away from bank accounts and undermine their lending capacity. Coinbase has applied for a federal trust charter, which could eventually give it permission to offer such rewards under stricter oversight. But the company also wants crypto platforms to retain the ability to offer these services without being required to obtain full licensing, warning that tighter rules would hurt fair market competition.
What’s at Stake: $1.3 Billion and USDC’s Market Dominance For Coinbase, this is more than a matter of principle. Stablecoin rewards are a major source of revenue, especially during bear markets. In partnership with Circle, the issuer of USDC, Coinbase earns a share of the interest income generated from the underlying reserves. Coinbase promotes USDC actively and currently offers customers a 3.5% yield on holdings through Coinbase One. If new laws shut down this offering, users may move their stablecoins elsewhere, and according to Bloomberg, Coinbase could lose up to $1.3 billion in annual revenue from this segment.
GENIUS Act Didn’t Solve the Problem — Banks Are Still Pushing Back The GENIUS Act, passed in July 2025, bans stablecoin issuers from paying interest directly, but still allows external partners like Coinbase to offer rewards based on account balances. Banking groups say that this loophole diverts deposits away from local banks and weakens access to credit for small businesses, students, and farmers. “Crypto exchanges aren’t FDIC-insured, don’t offer loans, and don’t take responsibility — but they’re siphoning off our customers,” banks argue. Coinbase counters that stablecoin rewards help protect the dollar’s global dominance. Chief Policy Officer Faryar Shirzad pointed out that China has already begun testing interest-bearing digital yuan, signaling future global competition.
Trump’s Administration Backed Crypto — but the Bill Is Stalling Trump’s second term has been crypto-friendly. The GENIUS Act brought the first nationwide rules for stablecoin issuers, prompting even traditional financial firms — and Trump’s own family — to rush into the market. The USD1 stablecoin, launched by World Liberty Financial, debuted just before the law came into force. Despite this, the broader crypto legislation is now hitting resistance. The battle over rewards has split bipartisan support, and Coinbase’s threat to withdraw adds real pressure to an already fragile process. Bloomberg Intelligence analyst Nathan Dean now estimates that the likelihood of passing the bill before June 2026 has dropped below 70%.
Seeking Compromise: Regulation Might Become Selective One compromise under discussion would allow only federally chartered or licensed institutions to offer stablecoin rewards. Five crypto firms have already secured preliminary approval from the Office of the Comptroller of the Currency (OCC) to become national trust banks — but traditional banking groups strongly oppose this, claiming it undermines the purpose of a charter and poses systemic risks. Even if restrictions pass, industry insiders believe crypto firms will find new workarounds. “There’s no world where we can’t reward users for actions inside apps,” said William Gaybrick, president of technology and commerce at Stripe. “If you’re holding stablecoins in an app, that app will find a way to credit you — one way or another.”
Conclusion: Lawmakers Trapped Between Dollar Stability, Banks, and Crypto Innovation Congress is now caught between pressure from the White House, economic lobbying from crypto companies, and resistance from traditional banks — and the clock is ticking. Whether lawmakers can deliver a balanced bill that protects consumers, fosters innovation, and preserves the dollar’s strength, remains uncertain.
Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies! Notice: ,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“