Earlier this year, during the annual Queen’s Speech in the United Kingdom, Prince Charles informed the Parliament about two bills. One of them — the Economic Crime and Corporate Transparency Bill — would expand the government’s powers to seize and recover crypto assets.

Meanwhile, the United States Internal Revenue Service (IRS) seized more than $3 billion worth of crypto in 2021.

As digital currencies’ monetary stock grows and enforcers’ scrutiny over the maturing industry tightens, the amount of seized funds will inevitably increase.

But where do these funds go, assuming they aren’t returned to the victims of scams and fraud? Are there auctions, like there are for forfeited property? Or are these coins destined to be stored on some kind of special wallet, which might end up as a perfect investment fund for law enforcement agencies? Cointelegraph tried to get some answers.

The dark roots of civil forfeiture

For the newcomers in the room, cryptocurrency is money. In that sense, the destiny of seized crypto shouldn’t differ much from other confiscated money or property. Civil forfeiture, the forceful taking of assets from individuals or companies allegedly involved in illegal activity, is a rather controversial law enforcement practice. In the U.S., it first became common practice in the 1980s as a part of the war on drugs, and it has been the target of vocal critics ever since. 

In the U.S., any seized assets become the permanent property of the government if a prosecutor can prove that the assets are connected with criminal activity or if nobody demands…

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