discussion Does governments regard crypto as a legal asset after all?

[kyoukage01 3181]

Most nations' governments today still regard cryptocurrencies poorly, legal-wise. But what happens when they suddenly find themselves holding large sums of crypto, after seizing digital assets from criminals, as an example?

 

If governments refuse to acknowledge that cryptocurrencies have worth and that they shouldn't even touch it with a six-foot pole, then one would expect that whatever crypto assets they would somehow get hold of would have been discarded, destroyed, or locked away in an inaccessible place. But some governments indeed liquidate those crypto assets. And if crypto is to be liquidated at a time when its price has increased due to volatility, what will the government do with the extra cash? If they decide to liquidate assets at a time its price has gone up, it would have been a very shrewd move on their part, and they would have actually profited from crypto, after paying up the various legal costs.

 

Governments also has the option to hodl cryptocurrencies they have seized. Remember the Silk Road incident? What would have happened if the U.S. government decides to keep the BTC they seized back then and sell them today at current prices? BTC prices have already skyrocketed since those days, so one would already have an idea of how much profit the government would make even though their policy over cryptocurrency today is a bit muddled at its best.

 

So maybe despite how much governments piss and moan about cryptocurrencies, once they get hold of large sums of it, they might change their mind after all. Cryptocurrency today has value, and there's no denying it, not even by them.

 

For more insight into this discussion, you can visit the following article:

Spoiler

A legal asset after all? Governments are cashing in on seized crypto

Kirill Bryanov

 

The way law enforcement agencies deal with seized crypto could indicate their de-facto acceptance of the asset class.

 

It is customary for government officials around the world to profess their disdain for crypto on the grounds that it is widely used to facilitate crime and finance terrorism. Although (government-backed) cash still remains criminals’ preferred financial tool by a wide margin, it is true that nefarious actors also turn to digital assets. When corrupt plans go sideways, law enforcement and other government agents can find themselves in possession of hefty sums of crypto.

 

It appears that reports of such instances are becoming more common as crypto adoption widens. In August alone, the United States Department of Justice announced the “largest-ever seizure of terrorist organizations’ cryptocurrency accounts” and a Tokyo court ordered Japan’s first-ever seizure of digital assets in a precedent-setting ruling. How do officials go about confiscating crypto, and what implications do their actions have for the contentious relationship between government institutions and the world of decentralized finance?

Source of state revenue

Regardless of how various states define cryptocurrency legally, they are still faced with addressing economic activity that involves borderless digital money. In the most frequently occuring scenario, crypto is seized alongside other property belonging to the exposed criminals.

 

Oftentimes, government institutions do not have the expertise or specific rules for crypto in place, so they have to deal with it ad-hoc. For example, when the Latvian tax authority seized Bitcoin (BTC) from a convict for the first time, reports emerged that officials let it sit in the criminal’s wallet even after having secured access to the funds.

Recognizing that cryptocurrency seizure done right could make for a steady flow of revenue, some jurisdictions are amending the rules around property confiscation to accommodate digital assets. In Russia, a somewhat controversial bill is in the works that would equip law enforcement agencies with a mechanism to forfeit crypto. The new rules could come into effect as early as 2021.

 

Other governments are finding creative ways to profit from digital money. A bill currently under consideration by the state of Illinois extends the list of assets that can be considered abandoned property and eventually claimed by the state treasury.

Cars, boats and crypto

In the United States, when law enforcement seizes cryptocurrency involved in illegal activity, it is generally auctioned off in largely the same manner as other seized assets. U.S. crypto lawyer Dean Steinbeck told Cointelegraph, “It is common to see law enforcement agencies like the U.S. Marshals Service (USMS) sell cars, boats and crypto to the highest bidder. I believe in February 2020 the USMS auctioned over 4,000 BTC.” Steinbeck added that he was not aware of any specific rules governing liquidation of seized crypto that are distinct from those of other asset types.

 

Jorge Pesok, a counsel in digital assets practice at law firm Crowell & Moring, told Cointelegraph that U.S. Marshals have authority over any property that has been forfeited under laws enforced or administered by the Department of Justice and its investigative agencies. Pesok said that there are experts at USMS who can handle pretty much any kind of confiscated property:

“It is unlikely that cryptocurrency specific liquidation rules will be developed, or need to be developed, because the Complex Asset Team within the USMS Asset Forfeiture Division is tasked with disposing of assets that require specialized knowledge and expertise, including operating businesses, stock and bonds. They now have added cryptocurrencies to the list.”

Elsa Madrolle, international general manager at blockchain security company CoolBitX, said that the liquidation of digital assets may be quite challenging due to a variety of factors ranging from “delays in prosecution to custody requirements to wildly fluctuating asset values.” Still, Madrolle noted, it’s estimated that well over $1 billion of digital assets have transited through the U.S. Marshals agency.

 

In 2013, when the online black market Silk Road was taken down, the U.S. government even became a top 10 Bitcoin holder. Madrolle added that auctioning off crypto is fairly common outside of the U.S., and some governments rely on well-known consulting companies as intermediaries in the process:

“Many other countries have also used auctions to sell seized digital assets: Australia (who opted to use Ernst & Young to do so), South Korea, the U.K., Bulgaria (using Deloitte), etc. In other countries, seizing digital assets is fairly new. In Taiwan interestingly, price volatility interrupted an attempted auction in 2018 and the courts opted to liquidate the seized Bitcoin instead.”

Effects on the market and beyond

Opinions diverge on how consequential the movement of seized crypto funds is for the digital asset market. Dean Steinbeck opined that the amount of digital assets moved around by law enforcement agencies is “typically tiny compared to the global marketplace.” At the same time, he doesn’t believe that government agency activity could have a significant impact on Bitcoin or other liquid cryptocurrencies.

 

In contrast, Madrolle pointed out that U.S. government agencies seem to be concerned with the potential repercussions of releasing extra liquidity into the crypto market. In 2016, the U.S. Marshals Service even signed a memorandum of understanding with the Treasury Executive Office for Asset Forfeiture and has been holding auctions to sell seized Bitcoin at regular intervals to limit impact to the market.

 

Madrolle thinks that the sentiment driving this policy is the most important takeaway here: By reinjecting seized crypto back into the system in a non-disruptive way rather than removing them from the marketplace altogether, law enforcement agencies globally “recognize them as a genuine asset.”

 

Steinbeck largely agreed with this interpretation, saying that government-backed auctioning are sending a “signal to the marketplace that they view cryptocurrency as a legal asset,” which is a small but positive step:

“Consider for a moment that law enforcement does not auction off the marijuana or cocaine it seizes. Illegal contraband is destroyed. So at least at the most rudimentary level law enforcement agencies are signaling that they view cryptocurrency as legal assets and they have no legal, moral or ethical issues selling and distributing as part of their routine operations.”

Indeed, there is some indication that in rare cases when government agencies oppose digital assets ideologically, such considerations can outweigh the obvious monetary benefits. One example is the Finnish Customs’ refusal to auction off some 15 million euros ($18 million) worth of Bitcoin due to the belief that it would go straight into the money laundering ecosystem.

source: https://cointelegraph.com/news/a-legal-asset-after-all-governments-are-cashing-in-on-seized-crypto

 

Edited September 2, 2020 by kyoukage01

[Ridam 7455]

That's indeed a point to be acknowledged by government officials. If they delayed the liquidity and hodl the seized Crypto currency, they would get huge profits. Eventually because of this profit the adoption may got positive feedback and starts faster. But if the country isn't regulating Crypto and find illegal Crypto funds do they liquidate it or only punish the person behind it?

[rekter 8129]

After confiscating enough, it's obviously in their interest to keep it legal in order to gain monetary value. But thing is that governments have many sections and the sections that want it to get legal, probably don't have any say in that.

 

And then there are many different "currencies" under crypto-umbrella, some of them don't have anugh liquidity for people to care, same are pump & dump schemes, some are outright scams. So they are looking at them case by case i guess.

[BrolySSJ 7899]

This is a great point of discussion and i have never before heard the argument from this side. I think you are absolutely right in what you are saying here. There are many governments that do seize a lot of crypto assets, the question lies in what they are doing with these assets after they seize them and i am very interested to see this. Perhaps this could be a stepping stone and a point of argument that could help in the legalization of crypto in many countries and states that will help to expand it in the future. The truth is that governments do use the seized crypto, then that would also be a criminal act if crypto is illegal in that country. 

[Zaino34 0]

Governments are still seeking to fight digital currencies in various countries because if these currencies are adopted, they will affect the local currencies of those countries and their economy, but I think with the passage of time the use of digital currencies will increase by people and then governments will be forced to accept these currencies as a way to buy and sell in various fields

[guatazoo 7150]

3 hours ago, Zaino34 said:

Governments are still seeking to fight digital currencies in various countries because if these currencies are adopted, they will affect the local currencies of those countries and their economy, but I think with the passage of time the use of digital currencies will increase by people and then governments will be forced to accept these currencies as a way to buy and sell in various fields

You are right the reason of governments to be not legalize cryptocurrencies is fear of that crypto can destroy fiat currencies, also they know mostly of people will not work in local jobs but they will only concentrate in cryptocurrencies. 

[Guru2050 8284]

It's true, Good number of countries still considered Crypto world as illegal assets. And this is basically attributed to some of the unique features of the system. These government's view the future of BTC and the entire Crypto world as a threat to their economy. As it may not be regulated by them. 

The issue of seize assets by some governments from criminals needs to be crystal clear, whether the decide to store it or make use of this seize assets as Investment, for strengthening their economy.

[Izeal 4404]

Even they could find the information of the people holding high amount of digital assets they can't do anything because believe me people are holding more and more cryptocurrency for future and government can do against the 1/3 rd population who invest in cryptocurrency.

But as my suggestion, if you are living in the countries where cryptocurrencies are banned then don't invest in them go for national stocks we can also get benefit from stocks.

[kyoukage01 3181]

On 9/2/2020 at 1:12 PM, Ridam said:

But if the country isn't regulating Crypto and find illegal Crypto funds do they liquidate it or only punish the person behind it?

Most likely, the government does both. Cryptocurrencies do have value after all. But maybe if the cryptocurrency in question is a shitcoin, maybe they wouldn't even bother with it. @rekter's post shares the same point:

On 9/2/2020 at 2:37 PM, rekter said:

And then there are many different "currencies" under crypto-umbrella, some of them don't have anugh liquidity for people to care, same are pump & dump schemes, some are outright scams. So they are looking at them case by case i guess.

I'll just add my opinion that the government usually does not liquidate assets including crypto right away, as they are to be used as evidence in trials first. They would have had a lot of time looking it up whether the crypto is a shitcoin or not and would have decided what to do with the crypto they've seized by then.

 

[gourav789 2834]

already some countries accept Crypto in there region , but mostly country denied to accept Crypto , beacuse they didn't control it's price , it's coinmarketcap value , even all transcation is hidden . hopefully with some term and condition Crypto currency is useable in whole world .

[magd 5231]

After the outbreak of the Corona epidemic, some countries ’view of cryptocurrencies changed, as the Blockchain contributed to providing aid paid in bitcoin to the affected countries, and this is evidence that they are able to help in crises Perhaps with the passage of time there will be global government recognition of these currencies

Edited September 4, 2020 by magd

[Syedbesharat 5423]

Goverment always make move in their interest if they find they could easily handle crypto they would come forward and form many policies. But it gives more freedom and power to people the government would sees it and make hard for people to put their hands on it. But the cryptocurrency is now making good progress where many good policies are introduced for crypto development in big countries. But most of high tier countries are against crypto currency like U. S. A, RUSSIA.

[Honny143 13612]

3 minutes ago, HodlKiddo said:

Most countries treat cryptocurrencies as an illegal one. Maybe it is because most cryptocurrencies are decentralized, that no one and not even the government control cryptocurrencies. Also, cryptos can be used for money laundering and maybe it is one of the reasons why they treat crypto as illegal.

Yes money laundering also one of the reason that so many countries not legalized crypto, if crypto have all advantages then all countries already regulated, but unfortunately crypto have some disadvantage also, 

If any crypto ban country sized crypto, then maybe they follows their country laws and sized this currency permanently.

[hasan007 206]

Few country are already start to accept crypto, but most of the country are still ignorant about the new system of economy. May be these country are worried about the controlling system of the crypto. If the county government unable to control the crypto then they are not going to adopt that. 

[Babubu609 0]

15 hours ago, CryptoSkye said:

i think some countries has their governments now agree that crypto is indeed an legal asset.

Yes there are some countries that are accepting crypto presently and we hope for more countries to continue to accept cryptocurrency and let it become legal and more popular.

[Digital 387]

Government are still deciding weather to adopt crypto or not but they think meby crypto currency will be threat to economic and banking system but perhaps in the future 

[MuhammadSh 3067]

After all? there are still many governments still against this cryptocurrencies project.. and there are others accept using bitcoin with some conditions and terms.. governments wouldn't accept using bitcoin easily without benefiting from that! and if they will require fees for using cryptocurrencies in the financial transactions so that's would really be bad.. let's wait and see when they would adopt this project and what would happen with the current international financial system!

[Omar Ommeish 4872]

On 9/2/2020 at 2:44 PM, overkill11 said:

Of course. Anything legal that has the potential to create a ton of money, the government wants to jump right into it. Putting limitation, taxes, these things the government will do to get a hold of control to the cryptocurrency market.

Yes, there are many countries that have started imposing taxes on cryptocurrencies in order to earn more money, and I think that countries have realized the importance of these currencies and started trying to benefit from them.

[Cryptic 0]

Cryptocurrency has so much benefits especially to the third world country, if the other country heard the story of Venezuela for sure they would quickly acknowledge it. Venezuela was suffering from hyperinflation rate, their currency almost worthless so they only rely on cryptocurrency to buy some goods. Also their government already invested to make their local exchange which has a feature that uses SMS to make payment and other transactions. 

Here is the link:

https://www.google.com/amp/s/cointelegraph.com/news/top-venezuelan-exchange-launches-support-for-offline-bitcoin-transfers/amp

[Mosab73 333]

I think that the monetary policies of governments are linked to political interests, and political influence is linked to economic and financial influence, so the artificial confusion of some global governments is their fear of emancipating people with money and moving away from banks and government jobs and thus not controlling the people, and in my opinion the problem is that the cryptocurrency is a decentralized currency that is difficult  controlling her

[SuperCrypto 7193]

On 9/2/2020 at 7:33 AM, kyoukage01 said:

So maybe despite how much governments piss and moan about cryptocurrencies, once they get hold of large sums of it, they might change their mind after all. Cryptocurrency today has value, and there's no denying it, not even by them.

 

Governments claim that cryptocurrencies are above the law, money can be laundered through them, and they can be used in some countries to support terrorism, and they confiscate them while they do not know their value. If the government knew its value, it would accumulate a fortune from it.

[Fixfin 2569]

It all depends on which government. Some have accepted crypto and others banned. It is all depending on where you live and to predict what will happen. This is why we need to not give our personal information away and not allow anyone know how much crypto we own.

[P A Ashif 2409]

I think that there are very few governments who support crypto and others either neglect its existence or don't support it. But I think that after 10 year there will be a great change to crypto world. There will be mass adoption. And we will able to pay through crypto for most of our transactions. We can see bank for crypto in different parts. It's my prediction. 

[Maaz sultan 265]

Now you see that many countries accepting there crypto currencies one by one and after some years they all knows the advantages and accepts these currencies as a legal money .

[nykas 2812]

Governments of some countries really like blockchain technologies and they want to implement it in different spheres. Nonetheless, many people and governments are still against of blockchain and crypto. Maybe it's because of knowledge alack, maybe there are other problems. I hope there will be improvements about this issue and there will be changes. Crypto can be useful for people

Edited September 20, 2020 by nykas