The UK Seized More Crypto Assets Than Cash in 2021, and the Trend Is Continuing

Yet there are complications, with hearings over exactly how much of the seizure will end up in the government’s coffers currently taking place.

Law enforcement agencies in the UK have been granted more powers to seize cryptocurrencies, as they become an increasingly common currency for criminals.

In 2021, the National Crime Agency (NCA) seized £26.9 million worth of cryptocurrency, 45 per cent of the total and more than the £25.9 million of cash seized in that year.

In its latest set of accounts for 2023-2024, it seized £6.2 million in cryptocurrency, about 13.7 per cent of its total asset seizures.

The digital currencies have been involved in a range of crimes within the UK, including terrorism.

In 2021, a British man was sentenced to 12 years imprisonment after he used bitcoin to send about £55,000 to the terrorist group Isis.

“Seizure is probably the most relevant aspect [of government holdings of cryptocurrency] in the Western world,” said Matthias Bauer-Langgartner, the head of policy in Europe for Chainalysis, the blockchain analysis firm, who worked in the enforcement division of the Financial Conduct Authority (FCA).

“There’s this realisation from governments that crypto is pretty much in every crime. And if you don’t look at crypto and crypto connections, you will miss a massive part of it. In the US, they’ve seized more than $5 billion worth of US dollars in bitcoin and you also see the UK increasingly making seizures.”

Earlier this year, new laws were enacted giving law enforcement agencies a range of powers to seize cryptocurrencies.

Law enforcement agencies can now take it from criminals before an arrest has even been made in some cases, or get third party crypto exchanges to freeze assets on their behalf.

Digital assets can then either be returned to victims, sold, or in some cases destroyed.

So-called privacy coins, designed to grant their owner a high degree of anonymity and often found on illegal dark web markets, are the sort of asset that might be destroyed rather than returned to circulation.

There are questions about how, and when, any more legitimate cryptocurrency should be sold, given their value tends to oscillate wildly.

Even at the sentencing of Wen, who was jailed for more than six years after she was found guilty of money laundering in May, the judge noted that the “volatility of bitcoin” meant even determining the value of what she had laundered had not been a “straight-forward exercise”.

“I don’t think anyone envisaged when they were writing this legislation that there would be billions of pounds sat in a government digital wallet. So, then the question is, well, if that is available, what happens to those funds then,” said Chris Etherington, a partner at the tax consultancy RSM.

In other countries, law enforcement has already encountered difficulties attempting to offload the asset.

In July, the German state of Saxony offloaded 49,858 bitcoins seized from the movie piracy website movie2k in just two weeks.

The sale netted the government about €2.64 billion, though the fire sale — mandated by German law which necessitates an “emergency sale” of such assets — may have pulled down the price of the asset itself by as much as 5 per cent in contrast to staging smaller sales over a longer time period. In any case, the government missed out on an extra $447 million by not holding on to its digital assets until today.

In the United States, just like other property seized under the Department of Justice’s Asset Forfeiture Program, bitcoin is entrusted to the US Marshals Service. It in turn holds crypto assets at Coinbase, the listed cryptocurrency exchange. At irregular intervals, the Marshals service disposes of clumps of bitcoin it has collected through a range of cases in sealed auctions.

In contrast, the UK’s powers are to some extent untested. Only in September, did police in Scotland use the new powers under the Proceeds of Crime Act to seize 23.5 bitcoins and convert a portion of it into almost £110,000 in cash.

Once the funds have been sold, however, the proceeds are then divvied up between the agencies involved in the case and the Home Office. The amount actually returned to the government depends on a number of factors, including payment of compensation to victims and recovery costs.

In some cases, money might even have to be returned to a foreign state via the UN Convention Against Corruption if the victims of a crime live outside the UK.

UK regulation states that,as far as possible, the sale of any crypto asset must be done “in the manner best calculated to maximise the amount obtained for the property”. However, it’s yet unclear to what extent the heady swings in the price of such assets must be accounted for.

Indeed, the FCA has frequently issued warnings to investors, emphasising the high risk and