At a conference in London this week, Nigel Farage, leader of the UK’s Reform Party, positioned himself as an “advocate” for the digital asset sector and proposed a series of policy initiatives.
These include: a flat 10% capital gains tax on cryptocurrencies; establishing a national Bitcoin reserve of approximately £5 billion using seized cryptocurrencies; halting the Bank of England’s digital pound project; and allowing taxes to be paid in cryptocurrency (on a non-mandatory basis).
This set of policy proposals bears similarities to the three policies outlined by Donald Trump during his cryptocurrency-focused campaign.
For instance, opposition to central bank digital currencies (CBDCs), public collaboration with cryptocurrency mining firms and industry stakeholders, and signaling from the White House that maintaining leadership in fintech is a federal priority within its digital asset strategy.
However, the policy transmission path in the United States is highly transparent—policy rhetoric often reflects in the fund flows of spot Bitcoin ETFs, which largely drive market demand.
The pace of policy progress in the UK is markedly different. The latest progress report issued by the Bank of England indicates that the Bank, together with the UK Treasury, remains in the design and exploration phase for a potential digital pound, with no decision yet made on whether to proceed with the project.
According to Consultation Paper 25/14 (CP25/14) published by the Financial Conduct Authority (FCA), short-term market attention is focused on the definition scope of regulated stablecoins and custody rules currently under consultation.
Meanwhile, the UK is preparing to permit the issuance of tokenized investment funds, a move that will provide banks and asset management companies with a streamlined market access channel unrelated to campaign policy proposals.
Factors such as power distribution, policy processes, and timelines determine that the Reform Party’s policy proposals are unlikely to translate into actual policies.
Following the 2024 UK general election, the Reform Party holds only five of the 650 seats in the UK Parliament, while the Labour Party has secured an absolute majority to form the government.
In the UK, tax rate adjustments must be approved through the Finance Bill. The government is responsible for formulating the reserve framework, with the Bank of England acting as the implementing agency to assist in execution. Both primary and secondary legislative documents require approval by the House of Commons and the House of Lords.
According to the Dissolution and Calling of Parliament Act, the next UK general election will not take place until August 2029 at the earliest.
In the current parliament, smaller parties are unable to dominate policy decisions at the Bank of England or the Treasury, and private member’s bills rarely become law. Even if some parts of Farage’s policy proposals gain support, they would need to be taken over by the incumbent government to have any chance of implementation.
If any element of these policy proposals were to be incorporated into mainstream policy, the underlying data supporting the core proposal would determine its potential impact.
UK Bitcoin-related data
At an exchange rate of 1.328 pounds to the dollar, a bitcoin allocation of 50 billion pounds equates to approximately 66.4 billion US dollars.
At a price of 112,000 US dollars per bitcoin, this would imply that the UK needs to purchase or hold between 59,000 and 60,000 bitcoins, representing about 0.30% of the current circulating supply of bitcoin.
In fact, the UK already holds a certain amount of confiscated bitcoins. Law enforcement reports indicate that 61,000 bitcoins related to a hacking incident in 2016 have been seized.
Theoretically, this reserve could make it feasible to establish a reserve by retaining confiscated assets.
However, under the Proceeds of Crime Act, confiscated assets are typically liquidated first and used for compensation, meaning the government would require clear legal authorization to hold such assets as reserves.
At the taxation level, cryptocurrencies are currently included within the scope of capital gains tax administration. Although a unified tax rate of 10% will reduce the actual tax burden for high-rate taxpayers and may alter the access methods, loss-harvesting strategies, and holding periods of cryptocurrencies in the UK market, the implementation of this rate adjustment still requires the government to submit and gain approval for the Finance Bill.
For market participants who focus on the transmission channels of policy rather than campaign rhetoric, the underlying mechanisms influencing capital flows are already underway.
The refinement of stablecoin issuance rules and custody regulations, coupled with clear development pathways for tokenized funds, will collectively establish institutional-grade market infrastructure.
This infrastructure will not only enhance the liquidity of the British pound in the cryptocurrency domain but also reduce operational friction costs for market-neutral strategies and basis trading strategies.
Although the UK’s policy trajectory differs from the US ETF model, as regulated infrastructure continues to improve, the market impacts of both approaches are likely to accumulate over time.
Therefore, campaign policies only gain practical significance when they are adopted by the ruling party or intersect with ongoing processes led by the UK Financial Conduct Authority and the Bank of England.
A Comparison with US Bitcoin Policy
Through a transatlantic policy comparison, we can better understand Farage’s choice of rhetoric.
Donald Trump has expressed opposition to the Federal Reserve issuing a digital currency, publicly sought support from mining companies, and signaled at the federal level an emphasis on maintaining leadership in the digital asset space, providing the cryptocurrency industry with a clear direction for development.
Subsequently, the transmission of these policies is reflected through the creation and redemption of spot Bitcoin ETFs, with related data appearing in weekly fund flow reports.
Currently, the UK has not yet developed a domestic spot Bitcoin ETF channel with a scale comparable to that of the United States. This implies that in the short term, the key factors influencing the activity of the UK’s cryptocurrency market are more likely to be regulated custody services, the connectivity between banks and cryptocurrency markets, and tokenized fund vehicles, rather than sovereign-level demand.
If the UK were to allocate sovereign Bitcoin on the scale proposed by Farage, this action would be clearly visible on the global ledger tracking Bitcoin holdings by nations.
Data from on-chain analysts shows that the US government controls a significant amount of seized Bitcoin; El Salvador also holds thousands of Bitcoins on its balance sheet. The UK’s current retention of 61,245 Bitcoins places it among the top holders globally (based on quantifiable scale).
Although this signal is highly explicit, the impact at the monetary policy level remains constrained by the overall scale of the UK’s foreign exchange reserves and the Bank of England’s inflation target. Therefore, we must focus on relevant legal frameworks, implementation processes, and institutional objectives.
If the Reform Party were to secure an absolute majority in the next UK general election and form a government, it would represent an unprecedented electoral reversal in modern British political history.
The party won only five seats in the 2024 general election. To increase its seats to an absolute majority (requiring at least 326 out of 650 seats), its seat gains would surpass the record for the largest seat increase achieved by any single party in a UK general election.
Notable examples of seat increases in UK history include:
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A surge in Labour Party seats in 2024: an increase of 211 seats compared to 2019.
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The largest number of seat changes in a UK general election occurred in 2024, with 303 seats changing hands; previous records were 289 seats in 1931 and 279 seats in 1945.
Market Context and Policy Feasibility
If a policy leads to the withdrawal of approximately 60,000 bitcoins from circulation or the continuous purchase of an equivalent amount over a period, it will marginally alter the overall trend of market capital flows.
The implementation pathway of the policy is crucial, and the legal basis for retaining confiscated assets rather than auctioning them is equally important.
These decisions need to be made by the government and the Bank of England within the existing framework, rather than being determined by smaller opposition parties.
Below is a concise overview provided for readers interested in data related to Farage’s policy proposals:
Looking ahead, the direction of the policy can be assessed through the following three key signals:
First, the Bank of England stated that the timeline coordination between the Bank of England and the Treasury regarding the digital pound and the modernization of the payment system will determine whether the scope of related design work is adjusted and if the pace changes.
Second, the progress made by the UK Financial Conduct Authority in formulating regulations for stablecoins and custody will determine the speed of infrastructure development for the pound in the cryptocurrency sector.
According to the planning of the UK Financial Conduct Authority, the implementation of final rules and subsequent regulatory enforcement will bring cryptocurrency-related activities under a more standardized regulatory framework.
Third, if major political parties decide to adopt parts of Farage’s policy proposals, any such developments will first be reflected in party manifestos and draft texts of the Finance Bill before potentially impacting sovereign reserve data.
Currently, the Labour Party holds a majority in Parliament, legislative procedures are proceeding as usual, and ongoing regulatory work continues as planned.
These factors collectively determine that the UK’s cryptocurrency policy will continue to advance along the direction set by the Financial Conduct Authority and the Bank of England, rather than the policy path proposed by the Reform Party.
Editor/Doris
