Russian law enforcement treats cryptocurrencies as property

The Russian government will rely on the cooperation of foreign-based trading platforms if it needs to seize crypto holdings as part of criminal proceedings.

This is the result of a bill that has been moving through the Russian parliament, which recently passed another hurdle. This law regulates the seizure of digital assets by the Russian state.

Russian law enforcement treats cryptocurrencies as property

Russian authorities will soon be able to control cryptocurrencies during criminal investigations under a new law, including seeking assistance from exchanges registered in other jurisdictions.

The bill, which aims to regulate this process, was adopted this week on second reading by the State Duma, the lower house of Russia’s parliament.

The document, submitted by the government in April, establishes a mechanism for the seizure and confiscation of digital coins involved in criminal cases.

Interfax news agency reports that the document passed on Thursday supplements the Criminal Code and Criminal Procedure Code of the Russian Federation with provisions recognizing cryptocurrencies as property.

The prominent economic newspaper Kommersant pointed out in an article:

“Law enforcement agencies will now be able to formally consider digital currencies as property and apply enforcement measures.”

The measures envisioned in the bill, which have not yet been finalized or implemented, will effectively combat cybercrime and illegal cryptocurrency transactions in Russia, lawmakers say.

Mikhail Uspensky from the Russian Association of Lawyers (ALRF) said the amendments are long overdue because Russian courts already treat digital currencies as property and criminal law is catching up with legal practice.

The new provisions will primarily benefit investigators and forensic experts who need clear instructions on how to proceed if they need to confiscate cryptocurrencies.

Many similar cases have occurred in Japan. This week, for example, two men were sentenced to eight years in prison for attacking a crypto blogger from Ryazan.

They forced him to transfer 13 million rubles (more than $160,000) worth of virtual currency to their wallets, which authorities later managed to return, RBC reported.

Dmitry Kirilov, head of digital law at Riddings Law Firm, pointed out that cryptocurrencies are increasingly appearing in criminal cases.

He added that the reforms to Russia’s criminal code were proposed in response to a significant number of criminal cases investigating virtual currency fraud, theft and other abuses, and further commented:

“There was a need to confiscate cryptocurrencies that were obtained in some way, for example through criminal means or associated with corruption crimes.”

New bill defines methodology for crypto seizures

Kommersant pointed out that there are two main ways to confiscate cryptocurrencies. You can either transfer your coins to another wallet or, in the case of hardware wallets, control the device itself.

Currently, the law provides for the evaluation of the market value of cryptocurrencies in order to calculate economic damages and compensate victims.

Law enforcement authorities will be required to fill out a protocol specifying the type of virtual currency, amount and address, Interfax detailed.

Cold storage wallets must be kept sealed as physical evidence, and the cryptocurrencies within them may be sent to another wallet for safekeeping.

The exact procedure for the transfer and storage of digital assets will be determined by the bylaws adopted by the Russian government after the law enters into force. It requires final approval from the Russian parliament.

Nevertheless, amendments added between the two readings of the bill make it clear that confiscated virtual currency will be allowed to be sent to a secure address if technically possible.

The bill also allows Russian authorities to seek cooperation from foreign crypto exchanges and other platforms that handle digital assets, and establishes norms for such interactions.

Russia’s Deputy Justice Minister Elena Ardabieva earlier commented on the bill, saying that law enforcement authorities would be free to request information on the market value of digital holdings and seize assets to the extent of damages suffered by defendants in specific cases.