Part 5 of the Proceeds of Crime Act 2002 (‘PoCA’) gives the authorities wide-ranging powers to recover the proceeds of unlawful conduct.

These powers include Cash Recovery, Account Freezing and Forfeiture Orders, and most recently, powers for the freezing and forfeiture of ‘cryptoassets’. The cryptoasset powers were introduced to PoCA by the Economic Crime and Corporate Transparency Act 2023 and came into force in April 2024. The procedure rules for cryptoasset freezing and forfeiture applications came into force 07 November 2024.

What is a ‘cryptoasset’?

PoCA defines a cryptoasset as “ a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically” (see s. 303Z20(1)(a)). This is the same definition the Financial Conduct Authority (among other public bodies) uses. Cryptocurrencies would likely be captured by this definition. There are thousands of cryptocurrencies, with new ‘coins’ being issued all the time. Probably the best-known example of a cryptocurrency is ‘Bitcoin’.

‘Cryptowallets’ are defined (at s.303Z20(1)(b)) as either hardware, software, a physical item, or any combination of those things, which stores the cryptographic private key needed to access cryptoassets.

When can my cryptoassets be frozen?

The new crypto regime mirrors the existing regime for cash (or ‘fiat money’) detention, freezing and forfeiture, with some updates to accommodate the technological aspects involved with cryptocurrency.

The test for a Cryptowallet Freezing Order (‘CWFO’ at s. 303Z37, PoCA) is: there are reasonable grounds for suspecting that some or all of the cryptoassets held in the crypto wallet are recoverable property, or are intended by any person for use in unlawful conduct. As these are civil matters, the applicant only needs to prove their reasonable grounds on balance. This is effectively the same as the test used for an Account Freezing Order (at s. 303Z3).

Can I challenge a Cryptowallet Freezing or Forfeiture application?

Yes. A person affected by a CWFO can apply at any time to have a CWFO order varied or set aside. To get the CWFO set aside, the applicant would need to show that the are no reasonable grounds for suspecting that the cryptoassets are recoverable property or intended for use in unlawful conduct. This can be difficult, as many authorities will respond to such an application by saying that they need time to investigate the issues identified in their original application. In our experience, the Courts are generally sympathetic to that argument. One approach is to provide the authorities with as much information as possible alongside detailed representations about why there can be no reasonable grounds for their suspicions, possibly before lodging such an application. As with most civil cases, there are costs implications for litigating prematurely / unsuccessfully.

There is a different legal test for Forfeiture of cryptoassets (at s. 303Z41(4)) which requires the applicant to prove (again, on balance) that the cryptoassets are, in fact, recoverable property / intended by any person for use in unlawful conduct. This is a harder test for the authorities to satisfy and so easier to oppose.

If you have had your cryptoassets detained or frozen by order of a Magistrates’ Court and would like advice and assistance to get them back, please contact our Crime and Regulatory Department on 020 7632 4300.