This week at a conference in London, UK Reform Party leader Nigel Farage positioned himself as a "supporter" of the digital asset sector and proposed a series of policy initiatives.

Specifically, these include: a unified capital gains tax of 10% on cryptocurrencies; establishing a national Bitcoin reserve of approximately £5 billion using confiscated cryptocurrencies; halting the Bank of England's digital pound project; and allowing tax payments in cryptocurrency (on a voluntary basis).

This policy proposal bears similarities to three policies put forward by Donald Trump during his cryptocurrency campaign.

For example, opposing central bank digital currencies, publicly establishing partnerships with cryptocurrency mining companies and the industry, and signaling from the White House that maintaining a leading position in the fintech sector is a federal priority.

However, the policy transmission path in the U.S. is very clear—policy statements have been repeatedly reflected in the fund flows of spot Bitcoin ETFs, which have largely driven market demand.

The pace of policy advancement in the UK is entirely different. The latest progress report from the Bank of England shows that the Bank of England and the UK Treasury are still in the design and exploration phase for a potential digital pound and have not yet decided whether to proceed with the project.

According to the UK Financial Conduct Authority (FCA) consultation paper CP25/14, the short-term focus of the market is on the definition of regulated stablecoins and the custodial rules that are currently in the consultation phase.

Meanwhile, the UK is preparing to allow the issuance of tokenized investment funds, which will provide banks and asset management companies with a convenient market access channel, and the establishment of this channel is unrelated to the campaign policy proposals.

Factors such as power distribution, policy processes, and timelines determine that the Reform Party's policy proposals are difficult to translate into actual policies.

After the 2024 UK general election, the Reform Party will hold only 5 of the 650 seats in the UK Parliament, while the Labour Party will achieve governance with an absolute majority of seats.

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 executing agency to assist in implementation, and both primary and secondary legislative documents must be reviewed and approved 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 be held until at least August 2029.

In the current Parliament, smaller parties cannot dominate the policies of the Bank of England or the Treasury, and very few backbenchers' bills can formally take effect as law. Even if some aspects of Farage's policy proposals gain support, they would need to be taken over and advanced by the currently governing government to have a chance of being implemented.

If any of his policy proposals are incorporated into mainstream policy, the data behind the relevant core proposals will determine the potential impact.

UK Bitcoin-Related Data

Based on an exchange rate of £1 to $1.328, the £5 billion Bitcoin allocation amounts to approximately $6.64 billion.

If calculated at a price of $112,000 per Bitcoin, this means the UK would need to purchase or hold about 59,000 to 60,000 Bitcoins, accounting for approximately 0.30% of the current total circulating supply of Bitcoin.

In fact, the UK already holds a certain amount of confiscated Bitcoin. Law enforcement reports indicate that 61,000 Bitcoins related to a 2016 hacking incident have been confiscated.

Theoretically, with this reserve, the plan to "establish reserves through retained confiscated assets" is feasible.

However, according to the UK Proceeds of Crime Act, confiscated assets are typically prioritized for liquidation and compensation, which means that if the government wants to hold confiscated assets as reserves, it needs to obtain clear legal authorization.

In terms of taxation, cryptocurrencies are currently included in the scope of capital gains tax administration. A unified tax rate of 10% would reduce the actual tax burden on high-rate taxpayers and could change the entry methods, loss harvesting strategies, and holding periods for cryptocurrencies in the UK market, but this tax rate adjustment still needs to be submitted by the government through the Finance Bill and approved before it can be implemented.

For market participants focused on the policy transmission path rather than campaign rhetoric, the underlying mechanisms influencing fund flows are already in progress.

The improvement of stablecoin issuance rules and custodial rules, along with a clear development path for tokenized funds, will collectively build institutional-level market infrastructure.

This infrastructure will not only expand the liquidity of the pound in the cryptocurrency sector but also reduce the operational friction costs of market-neutral strategies and basis strategies.

While the policy path in the UK differs from the U.S. ETF model, the market impacts generated by both may gradually accumulate as regulated infrastructure continues to improve.

For this reason, these proposals only have practical significance when campaign policy proposals are adopted by the governing party or intersect with the processes already being advanced by the FCA and the Bank of England.

Comparison with U.S. Bitcoin Policy

By comparing policies across the Atlantic, we can better understand Farage's choice of rhetoric.

Trump has expressed opposition to the Federal Reserve launching a digital currency, publicly sought support from mining companies, and signaled at the federal level the importance of maintaining a leading position in the digital asset sector, providing a clear direction for the cryptocurrency industry.

Subsequently, the transmission of policy has been reflected in the redemption of spot Bitcoin ETFs, with relevant data appearing in weekly fund flow reports.

Currently, the UK has not formed a domestic spot Bitcoin ETF channel on a scale that can compete with the U.S., which means that the key factors influencing the activity of the UK cryptocurrency market in the short term are more related to regulated custodial services, the connectivity between banks and the cryptocurrency market, 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 clearly appear in the global ledger of national Bitcoin holdings.

On-chain analysts indicate that the U.S. government controls a large amount of confiscated Bitcoin; El Salvador also holds thousands of Bitcoins on its balance sheet. The 61,245 Bitcoins currently retained by the UK place it among the top holders of Bitcoin globally (based on quantifiable scale).

Although this signal is very clear, the impact at the monetary policy level is still constrained by the overall scale of the UK's foreign exchange reserves and the inflation targets of the Bank of England, so we need to focus on the relevant legal basis, implementation processes, and institutional objectives.

If the Reform Party were to win an absolute majority in the next UK general election, it would represent an unprecedented electoral reversal in modern British political history.

The party currently holds only 5 seats in the 2024 election and would need to increase its seats from 5 to an absolute majority in Parliament (which requires at least 326 out of 650 seats), exceeding any single party's seat growth record in a single election in British history.

Notable previous cases of significant seat growth in UK history include:

• The Labour Party's seat surge in 2024: an increase of 211 seats compared to 2019.
• The largest seat change in UK election history occurred in 2024, with 303 seats changing hands; the previous record was 289 seats in 1931 and 279 seats in 1945.

Market Background and Policy Feasibility

If a policy leads to approximately 60,000 Bitcoins exiting circulation or continuously purchasing an equivalent number of Bitcoins over a period, it will marginally change the overall trend of market fund flows.

The execution path of the policy is crucial, and the legal basis for retaining confiscated assets rather than auctioning them off is equally important.

These decisions need to be made by the government and the Bank of England within the existing framework, rather than by smaller opposition parties.

The following is a concise overview for readers interested in data related to Farage's policy proposals:

Looking ahead, the direction of policy can be assessed through the following three key signals:

First, the Bank of England has indicated that the timeline for the digital pound and payment system modernization with the Treasury will determine whether the scope and pace of related design work are adjusted.

Second, the progress of the FCA in formulating stablecoin and custodial rules will determine the speed of infrastructure development for the pound in the cryptocurrency sector.

According to the FCA's plans, the final implementation of the rules and subsequent regulatory enforcement will bring cryptocurrency-related activities into a more standardized regulatory framework.

Third, if major parties decide to adopt some of Farage's policy proposals, relevant movements will first be reflected in party manifestos and draft texts of the Finance Bill, and only then may they be reflected in sovereign reserve data.

Currently, the Labour Party holds the majority of seats in Parliament, the legislative process is proceeding as usual, and existing regulatory work continues.

These factors collectively determine that UK cryptocurrency policy will continue to advance along the direction set by the FCA and the Bank of England, rather than the policy path proposed by the Reform Party.

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