The UK’s new digital asset recovery and forfeiture rules will come into effect in April.
New rules allowing for the confiscation and recovery of digital assets are set to come into force in the UK, giving authorities more powers to seize assets and increasing the chances of victims of fraud or crime recovering their digital assets.
The Economic Crime and Corporate Transparency Act 2023, which comes into effect on April 26, amends several laws, including expanding existing asset forfeiture and recovery powers to digital assets.
First introduced in 2022, the bill aimed to combat digital asset crime and compensate victims. It was approved by the British Crown and became law on 26 October 2023. On February 29th of this year, the UK government published a statutory document giving law enforcement new powers to freeze digital assets used in crimes without requiring a conviction. This could theoretically avoid lengthy legal proceedings that may have previously dragged on. procedure.
Following passage of the bill, Home Secretary Suella Braverman said: “I am committed to ensuring criminals do not profit from their crimes and this landmark legislation will help law enforcement crack down on the tactics they use. “It will be this,” he said. location).
She continued: “It will have a significant impact on our ability to fight organized crime, including terrorist financing, fraud and money laundering, and will ultimately help keep us all safe.”
New provisions and powers
The Act introduces a criminal and civil recovery regime for digital assets, or “crypto-assets,” as referred to in the Bill. It obliges exchanges and custodians to cooperate by providing law enforcement authorities with access to relevant transaction information and digital asset confiscation orders, allowing authorities to take items related to digital currencies. “Item” is defined as “asset item”. Contains or provides access to information that may be helpful in confiscating cryptocurrency.”
By amending the Proceeds of Crime Act (POCA) 2002, which allows authorities to issue and use court restraining orders to seize property, authorities will have the power to recover digital assets directly from exchanges and custody wallet providers. .
Broadly speaking, the POCA criminal and civil regimes have two categories of asset recovery powers: Criminal powers are used to impose a debt on a person convicted of an offense if he or she is found to have benefited from that offence. Civil authorities order direct possession of identifiable property that is deemed to have been acquired through illegal activity or intended to be used in illegal activity.
Provisions in the new law, which are specifically tailored to digital assets, will allow authorities to apply directly to the court for orders relating to digital asset exchanges that host wallets containing crime-related digital assets. This includes the ability to request an exchange order from the court to liquidate assets subject to a freezing order. It also includes the following provisions:
Competing claims to digital assets. For example, requiring a court to determine the true owner of a digital asset before ordering an exchange to liquidate it.
“This provision will expand the circumstances in which seizure powers for cryptocurrencies can be used, allowing cryptocurrencies to be seized faster and in more cases,” explained a UK government fact sheet on the bill.
“This will prevent those assets from going to waste. This will provide law enforcement agencies with the lawful authority to protect cryptocurrencies and the associated search and seizure powers to satisfy the digital nature of cryptocurrencies.”
One such law enforcement agency is the National Crime Agency (NCA). NCA chief General Graeme Biggar praised the bill, saying it provides “greater powers to seize and recover cryptocurrencies.”
What happens to recovered digital assets?
Seized or ‘recovered’ digital assets are sold once their illegal holders are permanently stripped of those assets, and the proceeds are used to compensate victims or reinvest in helping the state tackle economic crimes.
Regarding the return of assets to victims of fraud or theft, a somewhat divisive topic in the blockchain space, the UK government stated that the bill introduces provisions similar to those that exist for cash and POCA-registered assets. “All detained cryptocurrencies belong to their principals (real owners) who can apply to the court for the release of the cryptocurrencies or any portion thereof.”
It’s unclear exactly how the process of proving “true” ownership of an asset will work in practice, but this goes beyond simply owning keys (which, of course, can be stolen) and is likely to be a significant step forward for property rights. In the digital asset space.
Digital asset recovery is a hot topic in the trillion-dollar industry, especially given the high levels of fraud and illicit finance in the sector, and contrary to popular opinion, it is possible to recover stolen blockchain-based digital assets.
BSV was the first to enable digital asset recovery through the launch of a blacklist manager that can manage coordination between transaction processors (nodes) to freeze coins in accordance with court orders issued by authorities and digitize them through registered notary services. It was a blockchain.
As the spot BTC ETF brings the sector’s most popular digital asset into the mainstream financial arena, it is likely that more and more blockchains will adopt a similar approach to ownership and asset recovery.
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