Government officials around the world often admit their contempt for cryptocurrencies on the grounds that they are widely used to promote crime and terrorist financing. While cash (government-subsidized) remains the preferred financial instrument for criminals by a wide margin, it is true that scarers are also turning to digital assets. When corrupt plans go awry, law enforcement and other government agents may find they own large amounts of cryptocurrency.
Reports of such cases seem to become more common as cryptography spreads. It wasn’t until August that the US Department of Justice announced “the largest seizure of digital currency accounts of terrorist organizations in history,” and a Tokyo court ruled for the first time to seize digital assets by Japan. How do officials deal with cryptocurrency seizures and how do their actions affect the conflicting relationship between government agencies and the world of decentralized finance?
Source of government revenue
Regardless of how different countries legally define cryptocurrencies, they still face economic activity that includes unlimited digital money. In most cases, cryptocurrency is confiscated along with other property belonging to exposed criminals.
Oftentimes, government agencies don’t have specific knowledge or regulations for cryptocurrency, so they have to deal with them privately. For example, when the Latvian tax authorities first confiscated bitcoins (BTC) from a convict, there were reports that officials left them in the criminal’s wallet even after securing access to funds.
Recognizing that appropriately seized cryptocurrencies can provide a steady stream of income, some jurisdictions are changing the confiscation rules to accommodate digital assets. In Russia, there is a rather controversial bill that gives law enforcement agencies a mechanism for losing cryptocurrency. The new rules may come into force as early as 2021.
Other governments are looking for innovative ways to make digital money. The bill, currently under consideration by the state of Illinois, expands the list of assets that can be considered abandoned property and ultimately claimed by the state treasury.
Cars, boats and cryptocurrencies
In the United States, when law enforcement seizes cryptocurrencies involved in illegal activities, it is usually auctioned in the same way as other confiscated assets. US crypto lawyer Dean Steinbeck told Cointelegraph, “Typically, police agencies like the United States Marshal Service (USMS) sell cars, boats, and cryptocurrencies to the highest bidder. I think USMS auctioned over 4,000 BTC in February 2020. Steinbeck added that this was not the case. Be aware of any specific rules governing the settlement of confiscated cryptocurrencies that differ from other asset types.
Jorge Pisc, a digital asset consultant at law firm Crowell & Moring, told Cointelegraph that U.S. guards have jurisdiction over any property lost under laws imposed or administered by the Justice Department and its investigating authorities. Sand said there are specialists at USMS who can handle almost all types of seized property:
“It is unlikely that cryptocurrency liquidation rules will be developed or should be developed because USMS’s sophisticated asset forfeiture team is tasked with disposing of assets that require specialized knowledge and experience, including operating companies, stocks and bonds. … “They added. Now cryptocurrency is on the list. ”
Elsa Madrolle, global general manager of blockchain security firm CoolBitX, said that liquidating digital assets can be extremely challenging due to a number of factors, ranging from “delays in prosecutions and custody claims to extreme volatility in asset values.” … However, Madrolly noted that it is estimated that over $ 1 billion in digital assets went through the US Marshall Agency.
In 2013, when the networked Silk Road was removed from the black market, the US government became one of the top ten holders of bitcoins. Madrolli added that cryptocurrency auctions are very common outside of the United States, and some governments rely on prominent consulting firms as intermediaries in the process:
Many other countries have also used auctions to sell confiscated digital assets: Australia (which decided to use Ernst & Young for this), South Korea, UK, Bulgaria (using Deloitte), etc. Assets. Brand new.