The New Reality of Cryptocurrency Seizure in the UK
As of April 26, a new law has come into effect in the United Kingdom, allowing authorities to seize cryptocurrency assets from individuals suspected of criminal activity without arresting them or charging them with a crime. This change is a result of amendments to the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which amended confiscation regimes in the Proceeds of Crime Act 2002 (POCA). The UK police and National Crime Agency (NCA) now have the power to seize crypto assets, as well as physical items related to crypto investigations, such as flash drives and written passwords.
The Implications of Seizing Cryptocurrency Assets
The authorities can seize crypto from those suspected of criminal activity. This means that individuals who are not arrested or charged with a crime can still have their cryptocurrency assets taken away by the police or NCA. The authorities will also have the power to seize physical items related to crypto investigations and to "destroy" a crypto asset if returning it to circulation is not considered to be conducive to the public good.
Destroying Cryptocurrency Assets
Exactly how such assets will be destroyed has not been detailed. Regulators issued a circular on how to implement the law, but it is far from complete. The circular details the scenarios in which the powers of destruction can be exercised, but does not provide details on the practicalities of how such destruction will take place.
The Purpose of Seizing Cryptocurrency Assets
Supporters of the new measures suggest that they will help to combat cryptocurrency laundering, which has been used by criminal gangs for years to launder the proceeds of crime. However, if police begin seizing cryptocurrencies without their victims being charged with a crime, it is hard to see their approach as anything more than an asset-grab powered by a presumption of guilt without evidence.
The Controversy Surrounding Civil Seizures
Civil seizures that do not require charging victims with an offense have been a contentious issue in the UK for years. The police have the power to seize assets, such as cash, vehicles, and now crypto, related to suspected criminal activity while conducting their investigation. These powers are widely and regularly used by law enforcement agencies in the country.
The Expansion of Seizure Powers to Cryptocurrency
While it is unsurprising to see this approach expanded to crypto, authorities may now use this power as a means of carrying out unjustified – but legal – seizures. The approach does not acknowledge a presumption of innocence. The door is now open for UK authorities to abuse their power in targeting crypto holders and exploited for personal or political motives.
The Increased Likelihood of Unjust Seizures
Now that the police or NCA no longer require evidence to carry out an arrest before such a seizure, these new powers can be utilized at an earlier stage. This will increase the likelihood of seizing suspected proceeds of crime. However, taking such action at an earlier stage may also increase the possibility of mistakes being made.
The ‘Destruction’ of Cryptocurrency Assets
The law advises officials to "destroy" crypto if it is not collected within a year of its release. However, fails to note that crypto is indestructible.
Powers to Sell Seized Crypto Assets
Powers have also been granted to law enforcement agencies allowing them to sell seized crypto assets for cash. Market fluctuation is a major issue in the crypto market. So while these powers enable law enforcement agencies to sell crypto assets before they devalue, there is also the risk that they may be sold prematurely – just before the value of that crypto asset skyrockets.
The Global Implications of Seizing Cryptocurrency Assets
While law enforcement may welcome the changes, it is concerning that the ECCTA does not set out powers for UK law enforcement to share information with other agencies globally when crypto assets are being transferred to other jurisdictions. This creates a risk that UK police will be powerless to regain control of such assets if they are transferred out of their jurisdiction.
The Compromise on Individual Civil Liberties
The bottom line is that the new seizure regime compromises individual civil liberties, and we’ll soon find how vigorously authorities plan to use it to undermine our traditional right to due process.
Conclusion
As a lawyer and partner at Rahman Ravelli, a law firm in the United Kingdom, I have seen firsthand the impact of cryptocurrency on commercial and financial disputes. The new seizure regime is a concerning development that raises questions about the balance between individual civil liberties and the need for effective law enforcement. It remains to be seen how vigorously authorities will use this power to undermine our traditional right to due process.
About the Author
Syed Rahman is a guest columnist for Cointelegraph and a partner at Rahman Ravelli, a law firm in the United Kingdom, where he represents clients in commercial and financial disputes and major white-collar crime cases. He graduated from the University of Huddersfield with a law degree before obtaining a post-graduate diploma from York Law School. He is also a founding member of the Crypto Fraud and Asset Recovery network (CFAAR).
Disclaimer
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
References
- Economic Crime and Corporate Transparency Act 2023 (ECCTA)
- Proceeds of Crime Act 2002 (POCA)
- Circular on how to implement the law
Note: This article is a rewritten version of the original text, with added headings, subheadings, and emphasis on key points. The content remains the same as the original article.
