Reform UK Proposes Sweeping Crypto Deregulation, Calls for Bank of England Bitcoin Reserve

Executive Summary

Reform UK leader Nigel Farage unveiled proposals to deregulate the UK crypto market, including a Bitcoin reserve at the Bank of England and reduced capital gains tax, aiming to position the nation as a digital finance hub. The party's "Cryptoassets and Digital Finance Bill" outlines a strategy to attract investment and talent amidst ongoing UK economic considerations and evolving global crypto regulatory frameworks. These policies, if implemented, could significantly influence the UK's standing in the digital asset landscape.

The Event in Detail

Speaking at DAS London and later the Bitcoin 2025 conference in Las Vegas, Nigel Farage presented Reform UK's comprehensive plans for the UK's crypto sector. The core of his proposal is the "Cryptoassets and Digital Finance Bill", which seeks to implement several key changes. Foremost among these is a reduction in capital gains tax on crypto assets from the current 24% to a proposed 10%. Additionally, the bill advocates for the establishment of a Strategic Bitcoin Reserve within the Bank of England, a move intended to bolster the nation's digital asset holdings. Farage also emphasized the need for legal protections to prevent banks from arbitrarily closing accounts linked to lawful digital asset activities, addressing a concern that affects 400,000 people in the UK annually. He criticized both the Conservative and Labour parties for what he described as a neglect of the UK's financial services sector, asserting his ambition to restore London's prominence as a global trading center, inclusive of the crypto space. Reform UK has also differentiated itself by becoming the first British political party to accept donations in Bitcoin and other cryptocurrencies, signaling a direct engagement with the digital asset community. Farage reiterated his opposition to a Central Bank Digital Currency (CBDC), characterizing it as a potential threat to individual liberty.

Market Implications

Reform UK's proposals, particularly the concept of a national Bitcoin reserve and significant tax cuts, could have substantial market implications for the UK's digital asset sector. The plan to reduce capital gains tax to 10% aims to make the UK a more attractive jurisdiction for crypto investors and traders, potentially stimulating market activity and capital inflow. The establishment of a Bitcoin reserve at the Bank of England represents a significant shift in national asset strategy, drawing parallels to El Salvador's adoption of Bitcoin as legal tender and the US government's holding of seized Bitcoin assets. Advocates like Michael Saylor, Executive Chairman of MicroStrategy, have long championed governments adopting Bitcoin as a strategic asset, viewing it as a hedge against inflation and geopolitical risks. However, this contrasts with the UK Treasury's stated position, with Economic Secretary Emma Reynolds previously ruling out a national Bitcoin reserve, citing market concerns.

The initiative signifies a growing political recognition of digital assets within the UK and could set a precedent for other nations considering sovereign crypto holdings. If successful, these policies could significantly enhance the UK's position as a crypto-friendly jurisdiction, attracting both investment and talent within the broader Web3 ecosystem. This move also occurs amidst a dynamic global regulatory environment, including the formation of a UK-US task force aimed at harmonizing crypto rules and the Bank of England's focus on stablecoin regulation, as expressed by Governor Andrew Bailey who remarked that widely used UK stablecoins should have access to accounts at the Bank of England to reinforce their status as money. The integration of Bitcoin into national treasury management could influence investor sentiment towards corporate adoption trends of digital assets.

Broader Context

The proposals by Reform UK emerge during a period of considerable economic and political flux within the UK, where major political parties are contending over the nation's economic direction. Recent polls suggest Reform UK is gaining traction, indicating a potential shift in the political landscape that could lend feasibility to their digital asset agenda. The UK's current regulatory environment is also in transition, with a new Transatlantic Taskforce for Markets of the Future formed with the United States to foster cooperation on digital asset regulation and capital markets. This task force seeks to explore harmonized approaches to regulatory frameworks, custody, anti-money laundering standards, and stablecoin oversight.

Internationally, various jurisdictions are advancing their crypto regulatory frameworks, including the EU's MiCA regulation, the US GENIUS Act for stablecoins, and licensing regimes in Asian financial hubs like Singapore and Hong Kong. While some UK officials have expressed caution regarding state-level crypto adoption, the growing number of UK citizens holding digital assets—estimated at over 10% nationally, with one in four under 30—underscores the increasing relevance of crypto in the national economy. The debate surrounding Bitcoin reserves is not isolated to the UK, with countries like El Salvador and even a Taiwanese lawmaker exploring similar strategies, framing Bitcoin as a tool for financial sovereignty and a hedge against economic instability. Reform UK's bold stance aligns with global trends toward greater regulatory clarity and acceptance of digital assets, yet its ultimate implementation remains contingent on future political outcomes.