The Russian government is considering enforcing a law to curtail the use of digital assets for criminal activities, local financial news outlet RBC reported on November 7.
The Ministry of Internal Affairs of Russia, along with other relevant authorities, plan to roll out a legal mechanism that would allow seizure of virtual assets for confiscation by December 31, 2021. This would give police the power to confiscate any user’s bitcoins and other cryptocurrencies.
The plan comes in the wake of rising crypto-related illegal activities in the country.
Alena Zelenovskaya, head of criminal and administrative law practice at NSA Amuleks said,
“The trend of a constant increase in the number of crimes using virtual assets, the insecurity of individuals from this type of criminal encroachment, of course, dictate the need to develop mechanisms for legal regulation and control over the circulation of virtual assets.”
As per the new proposal, confiscation of virtual assets will be made possible only by the order of the court. Despite the resolve, how will authorities confiscate something that is completely decentralized is not clear.
Bitcoin and other cryptocurrency holders either store assets in a wallet or on a crypto exchange. Government will face trouble accessing the crypto wallet because each comes with a private digital key. This means that only the owner of the wallet has the password to unlock it. Additionally, the government will need to prove that the crypto wallet, which is completely anonymous, belongs to the said person.
If the assets are stored on a crypto exchange, the government will be able to block an account only if the exchange complies. Exchanges that operate outside Russian jurisdiction will be free to ignore any such requests.
That aside, for the confiscations to work, the Russian legal system will need to recognize crypto-assets as either commodities or an equivalent to cash. This would mean giving a legal status to crypto which might face heavy resistance from the Bank of Russia.
Though right now it might seem impossible to control something as ‘un-confiscatable’ as crypto, it would be interesting to note how the proposal shapes up and what it does to the backlash against bitcoin in several other countries.