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At a conference in London this week, UK Reform Party leader Nigel Farage positioned himself as a “supporter” of the digital asset space and put forward a series of policy proposals.
Specifically include:Impose a 10% flat capital gains tax on cryptocurrencies; use seized cryptocurrencies to build a national Bitcoin reserve of around £5 billion; halt the Bank of England’s digital pound project; allow tax payments in cryptocurrencies (optional).
This policy proposition bears similarities to three policies proposed by Donald Trump during his cryptocurrency campaign.
For example, opposition to central bank digital currencies, public partnerships with cryptocurrency mining companies and industries, and the White House’s signal in the digital asset strategy that fintech leadership is a federal priority.
However, the policy transmission path in the United States is very clear-policy remarks have been repeatedly reflected in the capital flows of spot Bitcoin ETFs, and such capital flows have largely driven market demand.
The pace of policy advancement in the UK is completely different.The latest progress report released by the Bank of England shows thatThe Bank of England and the UK Treasury are still in the design and exploration stages of a potential digital pound,No decision has been made yet whether to move forward with the project.
According to Consultation Paper No. 25/14 (CP25/14) issued by the UK Financial Conduct Authority (FCA), the focus of the market in the short term is the scope of regulated stablecoins and the custody rules that are in the consultation stage.
Meanwhile, the UK is preparing to allow the issuance of tokenized investment funds, a move that would provide banks and asset managers with easy market access independent of campaign policy claims.
Factors such as power distribution, policy processes, and time points determine that it is difficult to translate the Reform Party’s policy propositions into actual policies.
After the 2024 British general election, the Reform Party only occupies 5 of the 650 seats in the British Parliament, while the Labor Party will be in power with an absolute majority.
In the UK, tax rate adjustments require approval through the Finance Bill.The government is responsible for formulating the reserve framework, and the Bank of England serves as the executive agency to assist in its implementation. Both primary legislation and secondary legislative documents must be reviewed and approved by the House of Commons and the House of Lords.
According to the Dissolution and Convocation of Parliament Act, the next British general election will not be held until August 2029 at the earliest.
Small parties have been unable to dominate Bank of England or Treasury policy in this parliament, and backbench bills rarely become law.even ifFaragepolicy propositionSome of the content in the middle has received support and needs to be taken over and promoted by the current government in order to be implemented..
If any of its policy propositions are incorporated into mainstream policy, the data behind the relevant core proposals will determine the likely impact.
UK Bitcoin related data
Calculated based on the pound to dollar exchange rate of 1.328, a Bitcoin allocation of 5 billion pounds is equivalent to approximately 6.64 billion U.S. dollars.
At a price of $112,000 per Bitcoin, this meansThe UK needs to purchase or hold about 59,000 to 60,000 Bitcoins, accounting for about 0.30% of the current total Bitcoin circulation..
In fact, the UK already holds a certain amount of seized Bitcoin.Law enforcement reports show that 61,000 Bitcoins related to a hacking incident in 2016 have been seized.
Theoretically, with this reserve, the plan of “retaining seized assets to establish reserves” is feasible.
However, under the UK Proceeds of Crime Act, seized assets are usually prioritized for liquidation and used for compensation, which means that the government needs clear legal authorization to hold seized assets as reserves.
At the tax level, cryptocurrencies are currently included in the scope of capital gains tax.Although the 10% flat tax rate will reduce the actual tax burden of high-tax taxpayers and may change the access method, loss harvesting strategy and holding cycle of cryptocurrency in the UK market, this tax rate adjustment still needs to be submitted to the government and approved by the Finance Bill before it can be implemented.
For market participants who focus on policy transmission paths rather than campaign rhetoric, the underlying mechanisms affecting capital flows are already in progress.
The improvement of stablecoin issuance rules and custody rules, coupled with the clear development path of tokenized funds, will jointly build an institutional-level market infrastructure.
This infrastructure can not only expand the liquidity of GBP in the cryptocurrency field, but also reduce the operational friction costs of market neutral strategies and basis strategies.
Although there are differences between the UK’s policy path and the US’s ETF model, as the regulatory infrastructure continues to improve, the market impact of the two may gradually accumulate.
For this reason, campaign policy propositions will only have practical significance if they are adopted by the governing party, or if they intersect with the processes already being carried out by the Financial Conduct Authority and the Bank of England.
Comparison with U.S. Bitcoin Policy
Farage’s rhetorical choices can be better understood through a transatlantic policy comparison.
Trump has expressed his opposition to the Federal Reserve’s launch of digital currency, publicly sought support from mining companies, and sent signals at the federal level to emphasize his leadership in the field of digital assets. These measures have provided a clear direction for the development of the cryptocurrency industry.
Subsequently, the transmission of the policy is reflected through the subscription and redemption of spot Bitcoin ETFs, and relevant data will be reflected in the weekly capital flow report.
At present, the UK has not yet formed a local spot Bitcoin ETF channel that can rival the United States in scale, which means that the key factor affecting the activity of the UK cryptocurrency market in the short term isMore about regulated custody services, connectivity between banks and cryptocurrency markets, and tokenized fund vehicles than sovereign-level needs.
If the UK allocates sovereign Bitcoin on the scale proposed by Farage, this action will be clearly reflected in the global ledger of country-linked Bitcoin holdings.
On-chain analyst data shows that the U.S. government controls a large number of seized Bitcoins; El Salvador also holds thousands of Bitcoins on its balance sheet.The UK currently has 61,245 Bitcoins, making it among the top Bitcoin holdings in the world (based on statistical scale).
Although this signal is very clear, the impact of monetary policy is still limited by the size of the UK’s overall foreign exchange reserves and the Bank of England’s inflation target. Therefore, we need to focus on the relevant legal basis, implementation processes and institutional goals.
If the Reform Party were to win the next British general election with an absolute majority and govern, it would be an unprecedented electoral reversal in modern British political history.
The party only won 5 seats in the 2024 general election. To increase from 5 seats to an absolute majority in Parliament (it needs to occupy at least 326 of the 650 seats), its seat increase will exceed the record of seat growth achieved by any single party in a general election in British history.
Previous cases of significant seat growth in British history include:
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Labor’s seat surge in 2024: 211 more seats than in 2019.
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The largest number of seat changes in the history of British general elections occurred in 2024, with a total of 303 seats changing hands; the previous records were 289 seats in 1931 and 279 seats in 1945.
Market background and policy feasibility
If a certain policy causes about 60,000 Bitcoins to be withdrawn from circulation, or the same number of Bitcoins are purchased continuously over a period of time, it will marginally change the overall trend of market capital flows.
The path to implementation of the policy is critical, as is the legal basis for deciding to retain seized assets rather than auction them off.
These decisions need to be made within existing frameworks by the government and the Bank of England, not by small opposition parties.
The following provides a concise overview for readers interested in data related to Farage’s policy advocacy:
Looking forward, policy trends can be judged by the following three key signals:
First, the Bank of England stated that the time plan of the Bank of England and the Ministry of Finance on the digital pound and the modernization of the payment system,It will be decided whether the scope of relevant design work is adjusted and whether the rhythm changes..
Second, the progress of the UK Financial Conduct Authority in formulating stablecoin and custody rules will determine the speed of the pound’s infrastructure construction in the cryptocurrency field.
According to the plan of the UK Financial Conduct Authority, the implementation of the final rules and subsequent regulatory implementation will bring cryptocurrency-related activities into a more standardized regulatory scope.
Third, if the major political parties decide to adopt some of Farage’s policy proposals, the relevant trends will first be reflected in the party manifestos and the draft text of the Finance Bill, and then may be reflected in the sovereign reserve data.
Currently, the Labor Party holds a majority in parliament, the legislative process proceeds as usual, and existing regulatory work continues.
These factors jointly determine that UK 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.
