What you need to know about the confiscated cryptocurrency in Russia?

On May 30, the State Duma adopted a law on the confiscation of property obtained as a result of hacker attacks and other crimes in the field of computer information. Under the new law, property and money will be confiscated from those who “illegally gained access to computer information protected by law”, and the act entailed “destruction, blocking, modification or copying of computer information” and major damage. If the offender acted out of selfish interest, or the cyberattack was committed by prior agreement or using his official position, he also faces confiscation, RBC Crypto writes.

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Confiscation is understood as the forced gratuitous seizure and conversion into state ownership of the property of the convicted person, which was used to commit a crime or was obtained as a result of it. Theoretically, cryptocurrency can also fall under the scope of the article, since crypto assets, in fact, do not differ from other property, Yulia Privalova, head of the FinTech & Crypto practice at DRC law firm, explains.

Back in December last year, the prosecutor’s office said that they considered it necessary to allow the investigating authorities to start crypto wallets and cash out the confiscated cryptocurrency. The supervisory authority advocates recognizing digital assets as property that can become the subject of criminal encroachments. This will formally make it possible to confiscate such assets in criminal proceedings.

It is quite difficult to assess the scale of the circulation of cryptocurrencies in the criminal sphere in Russia, since basically “this is a latent crime,” comments Grigory Osipov, director of investigations at the security service for crypto-currency assets SCHARD. According to the RTM group, the number of criminal cases involving cryptocurrencies last year was 1,758. The total turnover of cryptocurrencies in Russia, according to various estimates, is about 10 trillion rubles.

“According to our data, only the total damage from the activities of the largest cryptocurrency pyramids over the past three years has amounted to about $5 billion. Hacker attacks have collected more than $1 billion in Russia over the comparable period,” notes Osipov.

If we consider the general approach, then hackers are the same criminals and commit theft, but digital property, there should not be any separate approach depending on the type of crime, the expert explains.

How cryptocurrencies are confiscated

Technologically, it is quite difficult to confiscate cryptocurrency, since it is a decentralized system, and there is no single body that could block individual wallets of network participants, Osipov continues. By decision of law enforcement agencies and courts, you can block accounts on exchanges and other services where it is stored.

“Also, law enforcement agencies can gain access to the wallets of intruders and operational methods, but so far in Russia there is no legal regulation of the cryptocurrency itself in terms of recognizing it as property, respectively, there is no mechanism for its confiscation,” says a representative of the SCHARD company.

It is theoretically possible to confiscate cryptocurrency, and there have already been similar precedents, Privalova notes. For example, in August last year, a district court in St. Petersburg allowed the seizure of stolen cryptocurrency and the seizure of 24 crypto wallets of the suspect, which contained 4 thousand ETH worth about 1 billion rubles.

The practice of seizing cryptocurrencies in Russia, at best, follows the path that law enforcement agencies seize either the medium itself where the cryptocurrency is stored (computer, smartphone, hardware wallet) or, if they know the key phrase for transferring funds, transfer funds to a separate hardware cold wallet , which is bought privately, explains Osipov.

If the wallet owner does not provide the passphrase required to transfer funds from the wallet, it is technically extremely difficult to gain access to it. In such a situation, even the existing court decisions on the confiscation of cryptocurrencies are not feasible, the expert notes.

If we are talking about decentralized platforms and cold wallets, where only the user has access to the wallet, forced confiscation becomes impossible until the accused himself provides all the data as part of cooperation with the investigation, Privalova agrees. But if the cryptocurrency subject to confiscation is on a traditional crypto exchange, you can oblige it to block and withdraw crypto assets. But in the event of a crime, such storage of cryptocurrency is unlikely, the lawyer clarifies.

“As practice shows, law enforcement agencies have rather poor knowledge and capabilities for investigating the tracing of digital assets and searching for wallets, and in principle they are very reluctant to take on such cases,” Privalova explains, referring to the experience of similar cases, “even if they come to them with a technical expert opinion on the cash flow chain”.

What to do with confiscated coins

Now in Russia there are no state crypto-wallets and mechanisms for storing and selling confiscated tokens, Osipov notes. But such mechanisms, in his opinion, must be promptly created and put into practice. Abroad, the seized cryptocurrency is transferred to the state cryptocurrency wallet and sold for fiat funds, which go to the state’s income, the expert explains.

Similar rules and instructions on what to do with the seized cryptocurrency have not yet been developed in Russia, confirms Privalova, who suggested taking foreign practices as a model. For example, in the United States, the first confiscation of bitcoins was carried out by law enforcement agencies during the suppression of the activities of the first anonymous digital market for the sale of drugs, Silk Road, whose assets were sold at four auctions at the then-current bitcoin rate for a total of $30 million.

The UK police in 2018 for the first time confiscated 295 bitcoins, which were found on a hardware cryptocurrency wallet, during the investigation of a drug trafficking case. The police transferred the cryptocurrency to a cryptocurrency wallet specially created for such needs and sold it at the current rate on the international cryptocurrency exchange for £1.25 million.

Source: bitcoinlinux.com