Cryptocurrency has come from being a fringe topic to mainstream headlines, not for its profits, however. Authorities around the world seize digital assets as part of criminal investigations, holding billions of dollars in cryptocurrency in their coffers. What then is seized cryptocurrency, and how does it find its way to law enforcement?
Seized cryptocurrencies can be defined as digital currencies such as Bitcoin and Ethereum seized by government agencies. This usually happens during an investigation into different illegal activities involving money laundering, tax evasion, cybercrime, and drug trafficking. Since cryptos and their transactions are anonymous and can easily cross borders, they have attracted the medium of carrying on illegal operations. This causes an increase in the regulatory body's scrutiny.
For example, in 2021, the United States Department of Justice seized Bitcoins valued at over $2.3 million that were allegedly related to ransomware attacks against Colonial Pipeline, the nation's largest fuel supplier. Such a significant case shows the improvement in the ability of the US government to track and trace cryptocurrencies; however, such an ability continues to evolve.
Seizing cryptocurrency differs from physical assets, where authorities need private keys to access digital wallets. Usually, access is obtained by cooperation with exchanges or by obtaining keys from suspects' devices.
Since 2014, the U.S. Marshals Service has auctioned more than 185,000 bitcoins seized in criminal cases, which would be worth more than $5 billion today. Other nations, such as Germany and China, are also liquidating seized cryptocurrencies.
Governments quickly auction off seized cryptocurrency to raise funds for law enforcement or crime victim programs. In 2014, the United States sold 30,000 Bitcoins from the Silk Road case, then valued at $19 million over $900 million. Due to the volatility of crypto, some countries, like the U.K., liquidate their assets quickly, such as when police auctioned £240,000 in 2021, channelling money towards crime prevention.
The impact of seizures and selling large volumes of cryptocurrency will be on the market that may be made. For instance, a government can announce that it is going to auction some seized assets; the slight increase in supply can at times affect the prices if the volume is large enough. Moreover, such cases prove the traceability of cryptocurrency and that it cannot be completely anonymous and unregulated.
The global cryptocurrency market size is estimated to be worth $5.2 billion by 2028. Therefore, the role of law enforcement in handling seized assets will most likely expand. Even though the impact of seized cryptocurrency auctions on prices is not significant, it reminds people that no digital asset is out of the law's reach.
Seized cryptocurrency is the newest addition to the crime landscape, offering a fresh way of disrupting illegal operations and reintroducing illicit funds into public service. With the growth of space in cryptocurrency, so does the understanding and control by law enforcement regarding these digital assets, which indicates that even in the digital age, crime doesn't always pay.