Russia proposes the ability to seize Bitcoin used in illegal activities in the future

Russia is planning to introduce new regulations that would allow the government to do the impossible: confiscate Bitcoin. The Russian Ministry of Internal Affairs is collaborating with various government bodies to draft the plan, which could come into effect as early as 2021.

Cryptocurrency Still Considered a Tool for Crime

According to a report, the push for new regulations is not aimed specifically at Bitcoin, but rather all cryptocurrencies or so-called digital assets.

Nikita Kulikov, head of the Russian parliament committee, stated:

The trend of using crypto assets for crime is on the rise, indicating the need to establish legal mechanisms to regulate the circulation of crypto assets.

In fact, cryptocurrencies still exist in a gray area in Russia. Therefore, in order to confiscate cryptocurrencies, they must first be legally recognized as assets of value, such as commodities or cash.

Therefore, if law enforcement agencies start discussing the confiscation of cryptocurrencies, it is essentially a process of legitimizing them. Although most countries do not consider cryptocurrencies as legal assets, there have been many precedents of cryptocurrencies being confiscated through court orders.

Private Keys Pose Technical Challenges

In theory, if the confiscated cryptocurrencies are stored on an exchange, law enforcement agencies can still seize the cryptocurrencies held by users through the exchange. Law enforcement agencies could theoretically issue a formal request to the exchange to freeze a customer's funds.

However, if the cryptocurrencies are held in a user's personal wallet with private keys, the method to forcibly confiscate their crypto assets remains a mystery. Government agencies may struggle to access private cryptocurrency wallets.

Private keys may be forgotten or lost by users, and in addition, law enforcement agencies would need to prove that a specific individual owns the encrypted wallet.

Prior to this, Russia has drafted several regulations related to cryptocurrencies, including a separate bill regulating ICOs, the Digital Financial Assets (DFA) bill, and exploring the feasibility of issuing a national digital currency CBDC, but there have been multiple delays.

Previously, it was reported that Russia does not have extensive restrictions on the mining industry. Russian mining company RMC announced plans to establish a large mining facility in northern Russia, which is estimated to account for about 20% of the overall Bitcoin network hash rate.

Further Reading

• China's Central Bank Digital Currency Research Institute Signs Agreement with Huawei
• UN Accuses North Korea of Using Hong Kong Blockchain Companies as Fronts for Money Laundering

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