Law debated allowing confiscation of Bitcoin by the police

Virtual assets, including cryptocurrency, are now on law enforcement’s radar.
Written by Charlie Osborne, Contributing Writer

Russia is considering a change in the law that would permit law enforcement to confiscate cryptocurrencies including Bitcoin (BTC).

As reported by local media publication RBC, Russia's Ministry of Internal Affairs aims to develop a form of "legal mechanism" for the seizure of cryptocurrency and other "virtual assets" by 2021. 

Proposals are being developed at present by the ministry, the Federal Financial Monitoring Service (Rosfinmonitoring), the Prosecutor General's Office, the Justice Ministry, and customs service, alongside other agencies. 

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Tracking cryptocurrencies can be difficult, but it is not impossible. Assets can be 'washed' — in which otherwise 'tainted' cryptocurrencies can be cleaned up through services that convert coins into other types — but otherwise, if computer systems are confiscated, law enforcement may be able to find and access active wallet addresses. 

However, keys may not be recoverable and the police would need to prove a wallet is owned by a suspect, leading to a raft of potential technical and legal challenges in cryptocurrency seizure. 

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In order to bypass some of the challenges with virtual asset seizure, officials have suggested that coins stored on exchanges could be subject to requests by law enforcement to freeze an account or to transfer funds to a state-owned wallet address. 

Such requests, as cryptocurrency exchanges do not operate inside Russian territory, could still be ignored. 

During investigations, equipment including PCs and mobile devices may be seized, and according to Nikita Kulikov, a member of the State Duma's council as quoted by RBC, such seizure should also apply to virtual assets. 

The publication added that cryptocurrencies are in a gray area in Russia, and so would need to be recognized legally as either a "commodity or a cash equivalent."

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A draft law has been in development since 2017. The State Duma has adopted its first reading and a second is underway. 

Russia's attitude to cryptocurrency appears to be in a constant state of flux. The country has previously introduced the CryptoRuble, a stablecoin intended to rival Bitcoin, and yet, the central bank and President Vladimir Putin have deemed cryptocurrencies a serious risk to existing financial systems and little more than a tool for criminal activity. 

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