New Rules for Seizing Crypto in the UK

By Julissa.

The UK has introduced new regulations that will help the authorities seize crypto assets more easily.  The law gives this right to the police and other law enforcement agencies.  It’s part of a wider effort within the country to seize the property that was obtained unlawfully.

The power to do so becomes effective almost immediately, and when it’s first used on crypto, it will make the news in both the crypto circles and the wider public.

New Rules for Seizing Crypto in the UK

What are the Changes?

The main change in the law is about when the police can seize someone’s crypto assets.  The rules state that the person needs to be arrested before the police can temporarily take their property.  However, with crypto, those who obtained the assets illegally could sell them.

The rules come after Parliament passed a bill last year that allows for it to happen, and now it’s put into action by the Police and the other relevant agencies.  The agencies are adapting to the world in which crypto is commonly used.

The Press Release

The Home Office has announced the changes in the regulations in a statement to the press.

Organized criminals, including drug dealers, fraudsters, and terrorists, are known to increasingly use cryptoassets to launder the proceeds of crime and raise money.  The NCA’s National Assessment Centre estimates that illicit crypto transactions linked to the UK are likely to have reached at least £1.2 billion in 2021, if not significantly higher.

To tackle this emerging threat, the government has updated proceeds of crime and terror legislation, making it easier for UK law enforcement to investigate, seize, and recover illicit crypto assets effectively.

What are The Changes?

There are a few major changes, as stated by the Home Office.

  • The police can now seize the crypto assets before making an arrest. It creates an element of surprise needed to prevent the users from selling the assets.
  • The assets can be used to give information that will help the investigation.
  • Officers will transmit the crypto taken in this manner into a crypto wallet run by the police, preventing criminals from using it.
  • The UK police will be able to destroy the crypto asset in some cases. It can happen if the return of the asset isn’t conducive to the public good.
  • Victims will also be able to apply for money belonging to them in a crypto assets account to be released to them.

Cooperation with the US Agencies

In January 2024, the NCA worked with the United States Drug Enforcement Administration to investigate a multi-million drug enterprise, which led to $150 million in cash and crypto being seized.

Three men involved in the case were selling counterfeit drugs on the dark web and accepted crypto as payment.  They were jailed for 20 years combined.

HMRC also seized NFTs in a VAT fraud case.  The suspects were trying to defraud the agency of £1.4 million.

“It is vital that investigators and prosecutors have the capability and agility to keep pace with this changing nature of crime, which these new measures will greatly assist our ability to restrain, freeze, or eliminate crypto assets from illegal enterprise,” said Chief Crown Prosecutor Adrian Foster in the press release.

Crypto Wallets Owned by the Government

The law enforcement agencies have also created a government-owned and operated crypto wallet.  This allows the police to hold the crypto until the end of the proceedings but also to destroy it if that’s what the court has decided to be in the interest of the public.

“There are officers now in every force in every regional organized crime unit, trained and equipped to do that,” Andrew Gould, staff officer for NPCC’s cryptocurrency portfolio, said while speaking at a hearing for the new Economic Crime and Corporate Transparency bill.

So we’re in a position where we’ve actually seized hundreds of millions of pounds worth of cryptocurrency assets within the last year or so,” Gould said.

The police have been working on a more robust set of tools for dealing with this sort of assets for months now, in cooperation with.

The Cost of Keeping Up

However, the police were also upfront about their shortcomings when it comes to crypto and the latest financial technology.  It’s not able to keep up with it as it’s costly for the government to introduce new tools and instruct the police officers about the latest developments.  In many cases, that process is too expensive for large corporations as well, let alone the government.

“The assets themselves are becoming more diverse, more technical, complex, so our officers are kind of in an arms race trying to keep up,” Gould said, adding that the tools they do use can’t accommodate every crypto asset.

“So we need more than one investigative tool to better investigate effectively.  That’s very expensive,”

The Pull of the Private Sector

The UK police is also struggling with the pool of the private sector when it comes to cryptocurrency regulations.  Both the government and the private sector need their services, but the private sector can pay much higher wages than the government.

“One of my sergeants has just been offered 200,000 [pounds] to go to the private sector.  We can’t compete with that.  That’s probably the biggest risk we face within this area at the moment,” Gould said.  That’s twice the annual salary of those working for the police.

The New Era

The change in the police procedures when it comes to crypto is a sign of a larger shift in the public attitude towards crypto.  It’s now widely used and not uncommon for an average person to keep as a part of their portfolio and long-term savings.  Gambling with cryptocurrency is already commonplace, and you can read more on this page about the options available.  However, cryptos are now also used to save and invest as well as to pay for common services.

The criminal element has also adapted to the new realities, and there’s a push to change other rules and regulations made for fiat money or traditional financial assets to fit crypto as well.

Wider Crypto Regulations

 As the use of cryptocurrencies becomes more common, more traditional financial institutions are looking to get into it, and more regulations will be put in place.  For some crypto investors and users, this is a disappointment, as the main appeal of crypto is that it’s not regulated.  However, for others, it’s a sign that they’ve gone mainstream.

The EU has come up with a broad set of laws that will govern the use of crypto, and the UK and the US will follow along.  This has already led some crypto companies to move out of the EU markets.  Regulations such as the ones set up by the UK police are just a way to adapt to the times.

Conclusion

 The UK has implemented new regulations enabling easier seizure of crypto assets by law enforcement, aiming to combat illicit activities.  Police can now seize assets before arrest, preventing their sale, and use them to aid investigations.  Assets seized will be held in a government-operated wallet, with provisions for destruction if deemed in the public interest.

Recent collaborations with US agencies have resulted in significant seizures.  However, police acknowledge their struggle to keep pace with evolving crypto technologies due to cost constraints and competition from the private sector.  These changes reflect a broader shift towards mainstream adoption of cryptocurrencies and increased regulatory oversight globally.

IMAGE CREDIT: Freepik

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