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13/06/24

POCA Makes Provision for Cryptocurrency

POCA Makes Provision for Cryptocurrency
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Since the Proceeds of Crime Act 2002 (POCA) was introduced, essential amendments and additions have been made. These changes, which have been discussed in previous articles, enable the legislation to keep abreast of the changing requirements of society and the operation of financial markets.

One such requirement is the need to cater for the arrival and ever-increasing use of cryptocurrency since the introduction of POCA.

Tim Thompson of KANGS comments upon the way POCA has been amended to cater for financial activity involving cryptocurrency.

The Arrival of Cryptocurrency

The traditional remedies of enforcement under POCA, such as Account Freezing Orders and Forfeiture are effective in relation to conventional methods of asset holding, such as bank accounts, investment holdings and cash. However, they proved inadequate to effectively restraining and seizing of assets and currency received and transferred online across cryptocurrency platforms and wallets.

These new forms of trading mechanisms, being totally unregulated, were discovered to be facilitating their use for handling the proceeds of crime arising from illegal activity such as the sale of drugs, fraud and tax evasion.

The Relevant Law | POCA

Confiscation Orders can be issued against cryptoassets held by a person in a cryptowallet administered by a UK connected crypto asset service provider. The Court now has powers to force realisation and payment of funds held within accounts to appropriate officers.

Definitions

POCA describes cryptoassets and cryptowallets as follows:

S.84A(1) Cryptoassets

Cryptoassets are cryptographically secured digital representation of value or contractual rights that use a form of distributed ledger technology and can be transferred, stored or traded electronically.

s.84A(2) Cryptowallet

A cryptowallet means:

  • software,
  • hardware,
  • a physical item or
  • any combination of these things

used to store the cryptographic private key that allows cryptoassets to be accessed.

S.67ZB Meaning of ‘UK-connected cryptoasset service provider’

Such a provider is one which:

  • is acting in the course of its business in the UK,
  • provides for disputes to be settled in UK courts,
  • holds its relevant data in the UK,
  • has its registered or head office in the UK,
  • conducts its day-to-day management in the UK.

S.67ZA Cryptoassets

A Magistrates’ Court may Order that the UK-connected cryptoasset service provider which administers the cryptowallet in which the cryptoassets are held to:

  • realise the cryptoassets, or a portion having a specified value,
  • pay the sale proceeds into Court, up to the maximum amount of the Confiscation Order and
  • pay any amount received exceeding the Confiscation Order to an appropriate Court Officer.

S.67AA Destruction of seized cryptoassets

Where seized cryptoassets are held by an appropriate officer, a Magistrates’ Court may Order them to be destroyed where:

  • a Confiscation Order has been made against the person holding the cryptoassets,
  • there has not been a Receiver appointed,
  • it is not reasonably practicable to realise those assets or there are reasonable grounds to believe that their realisation would be contrary to the public interest.

With these amendments, POCA now regards cryptoassets as realisable and recoverable property line with existing categories of assets rendering them available to:

  • Forfeiture
  • Confiscation
  • Seizure
  • Destruction

How Can We Help?

Should you become subject to POCA proceedings of any nature, including those involving cryptoassets, you should seek legal assistance immediately. The Team at KANGS has gained vast experience in all aspects of POCA having been involved in some of the most profile POCA cases since its inception.

If we can assist, please feel free to contact our Team who will be delighted to assist.

Tel:       0333 370 4333

Email: info@kangssolicitors.co.uk

We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.

Hamraj Kang

Hamraj Kang
Senior Partner

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Tim Thompson

Tim Thompson
Partner

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John Veale

John Veale
Partner

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