Recently, Bit2Me collaborated with the Civil Guard in Spain to recover cryptocurrencies blocked in a cold wallet.
Regulators know that some groups use cryptocurrencies for their illegal activities, so they have been working for some time to stop this type of activity. The US Internal Revenue Service (IRS) has seized Over $3.000 Billion in Cryptocurrency in 2021 AloneIn Spain, the Civil Guard and the National Police have also seized cryptocurrencies from illegal businesses throughout 2021 and 2022.
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This problem has reached the Parliament of the United Kingdom, where Prince Charles has intervened to explain the Draft Law on Economic Crimes and Corporate Transparency, which will expand the government's powers to intervene in cryptocurrencies originating from illegal businesses.
As with fiat money, as the value of cryptocurrencies grows, they are more likely to be used in illegal activities, and therefore, it is also more likely for authorities to seize cryptocurrencies and wallets derived from these activities.
In this regard, many users are wondering what happens to those cryptocurrencies confiscated in illegal activities and where that money goes.
Where do the seized cryptocurrencies go?
According to the Spanish legal code, seizure is the “dispossession of property and effects by the competent authority for reasons of public interest or illegal actions.”
In other parts of the world, for example in the United States, it is the “forced seizure of assets from persons or companies allegedly involved in illegal activities.” Unlike in Spain, in the United States it is a controversial practice, which began in the 80s, during the years of the fight against drug trafficking.
In the case of the United States, the seized assets become property of the state government permanently, provided that a prosecutor proves in court that the assets are directly linked to illegal activities. In some cases, up to 1% of the assets are returned to their owner, although more often they are used to improve public services, for example, they are invested in education or in improving the equipment of law enforcement agencies.
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In Spain, the process is a little different. At all times, the money remains under judicial control. During the procedure, the money is held in custody by the court, if a conviction is issued (i.e. it is proven that the funds are illegal), The funds are immediately returned to the Public Treasury.
Recently, Bit2Me collaborated on a pilot project with the Office of Asset Recovery and Management (ORGA) of the Ministry of Justice and the National Police to transform 1.994,036 Bitcoins seized in fiat money (€56.449,01), within the framework of a legal procedure.
What about cold wallets?
The case of cryptocurrencies is a bit particular, since in most cases the agents did not seize the cryptocurrencies themselves, but rather they took the software wallets that contain them.
Cold wallets are objects, since they are devices similar to a USB. In this case, the process is similar, since it becomes the property of the State. In these cases, the problem lies in accessing those funds that have been blocked behind passwords.
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