Tightening the links on the blockchain: The regulatory advances on cryptocurrency

Article written by Kevone Morris

On the 22nd of September 2022, the government released the first reading of their proposed bill: The Economic Crime and Corporate Transparency Bill 2022 (henceforth referred as ‘the Bill’). The Bill puts forth a multitude of different propositions for tackling different white-collar crimes, with part of the Bill focusing on strengthening the recovery of crypto assets acquired via or during the course of ill-gotten gains. The Bill brings up the growing concern of criminals using crypto assets to make, launder and transfer their proceeds made during their activities and the unfortunate reality that said assets go unrecoverable. To allow for a larger number of crypto assets recovery, the Bill suggests amendments to the Proceeds of Crime Act (‘POCA’) 2002 Part 2, 3, 4 for criminal recovery and Part 5 for civil.

Proposed criminal proceedings

— Remove the requirement for a person to have been arrested before seizure powers can be used earlier in the process.

— Introducing provisions for officers to recover crypto assets similarly to tangible property. For example is given, officers have the authority to recreate crypto asset wallets and transfer assets into law enforcement-controlled wallets.

— Confer the magistrates’ court the powers to authorise the sale of any crypto assets.

— Allow for the destruction of crypto assets where a financial gain for the sale of those assets would be outweighed by the loss to the public.

Proposed civil proceedings

— Take control of and recover ‘unhosted’ crypto assets that are discovered by law enforcement when executing a search warrant.

— Enable recovery directly from crypto assets exchange providers and custodian wallet providers.

— Provide for the destruction of crypto assets in circumstances where the financial gain on the sale of those assets would be outweighed by the loss to the public.

— Allow for detained or frozen crypto assets and related items to be released to victims at any stage of proceedings, ameliorating the negative impacts of fraud.

Commentary on the Bill

This proposition from the government is a good-welcomed one, to say the least. Since the mid-late 2010s and early 2020s, with the exponential growth in the volume of crypto assets such as NFTs and users with said assets, it has become paramount for regulations to keep up with the growing use of crypto assets by those with ill intentions. In particular, crypto assets have been popularised by fraudsters for facilitating their fraudulent activities such as developing new crypto assets to be subsequently abandoned, taking all the investors’ money with it. As highlighted by the Financial Conduct Authority (FCA), ‘Crypto asset fraudsters tend to advertise on social media – often using the images of celebrities or well-known individuals to promote cryptocurrency investments. These tactics have resulted in thousands being lost by those less educated on the topic of crypto assets. Under the Bill and subsequent amendment to POCA at least these individuals may see their money back. As for now, we just have to see whether it reaches Royal Assent or not.