Can The Government Seize Your Bitcoins?

Governments and regulatory authorities worldwide are struggling to find ways to regulate cryptocurrencies. Some countries such as El Salvador have adopted Bitcoin as legal tender but, major global economies like the US still hold reservations despite allowing its usage in transactions. Critics are concerned digital currencies operate in an unregulated market, encouraging criminal activities. That begs the question, can the government take your Bitcoins?

Bitcoin Seizure

Bitcoin is a decentralised digital currency, not subject to any government or central authority. However, several governments recognise Bitcoin as an asset, subject to property laws such as seizure. Thus, investors and individuals could lose their funds to Bitcoin seizure. That occurs when the law enforcement authorities prove that an individual or entity has used Bitcoin to commit a crime or acquired Bitcoin through fraudulent means.

The authorities usually seize Bitcoin by obtaining the address and private key of the individual or organisation in question. Sometimes, they may also target the crypto exchange Brexit Millionaire that hosts the wallet they intend to seize. The authorities can also acquire the owner’s cold wallet by a court order. In Bitcoin seizures, the law enforcement authorities will also disclose the individual’s history of transactions to show probable cause.

In the United States, the Attorney’s Office establishes the procedures for seizure assets, including virtual investments like Bitcoin. They usually collaborate with the US Marshals Office to determine the value and quantity of Bitcoins seized. Then, the prosecuting agency will file an application and affidavit in court to disclose the allegations and obtain a seizure warrant.

The prosecution’s primary concerns in Bitcoin seizure cases are the logistics and probability of forfeiture and whether this asset is sufficiently valuable to warrant a seizure at the time. The prosecutorial strategy will depend on several variables but, only the US Marshals Office is authorised to auction off seized Bitcoins. However, the prosecution must prove that the seized Bitcoin funds were proceeds of crime or were used to commit criminal activity.

Reasons for Bitcoin Seizure

The government can take your Bitcoins under an arrest, search, and seizure warrant, defining the specific asset to seize. Thus, two main reasons could lead to Bitcoin seizure.

Bitcoins Used to Facilitate Criminal Activity: Government authorities can obtain a court order to seize your Bitcoins if they believe the funds facilitated a crime. Facilitation refers to any conduct or act, making the offense harder to detect and track, or any instrument used by the individual to enable the crime. For example, a company that engages in financial services using Bitcoin. Doing business without the appropriate licensure could contribute to money laundering charges or conspiracy to launder money. The authorities assume criminals can use the assets to facilitate crimes after obtaining them illegally. Thus, authorities could seize them if they were used in or enabled the commission of the alleged offense.

Bitcoins Acquired from Illegal Activity: Criminals usually get paid to commit crimes, making their proceeds illegal even if they receive the funds in crypto. For instance, taking Bitcoin as payment for the sale of narcotics, an assassination attempt, terrorism, or computer hacking would render the funds as proceeds of crime. That would give the authorities probable cause to seize your Bitcoins.

Apart from Bitcoin seizure, the government could also take your Bitcoins through criminal forfeiture, resulting in the permanent loss of those funds. However, both incidences can only occur if there is probable cause that the Bitcoins are proceeds of illegal activity or were used to facilitate a crime. Thus, there is nothing to worry about if you use your Bitcoins responsibly, without breaking any laws.