Traditionally, let's start with an explanation. Cryptocurrencies are decentralised, that is, without a single decision-making centre and with equal participants in the network. This means that no one can appropriate someone else's bitcoins, ethers and other coins without the permission of their owner, provided the cryptocurrency is on a full-fledged, non-custodial wallet.

However, there is another side to this. In particular, if a user keeps coins on exchanges or other centralised storage services, they can be seized or frozen. This is why the saying "not your keys, not your bitcoins" is popular in the cryptocurrency community. These are the private keys to the address that provide access and control of the coins.

However, sometimes crypto is also confiscated from full wallets. Here are similar cases.

How cryptocurrency can be seized

There is no short answer to the question above, as government agencies use a wide range of tactics to find and seize digital assets. Here’s a quote on the subject from former FBI analyst Crane Hassold in an interview with Decrypt, in which he shares his experiences.

Because cryptocurrencies have become such an integral component of cybercrime today, especially when it comes to ransomware, the US government has recently focused on finding ways to recover funds seized from digital wallets. An excellent example of this is the FBI’s announcement last week of the creation of a Virtual Asset Recovery Unit.

Cryptocurrency mining

Hassold noted that the exact tactics of government agencies “remain secret”. However, we can draw a few conclusions about them based on news of crypto seizures in previous high-profile incidents. One recent one is the seizure of bitcoins by the US Department of Justice. These are the coins that figured in the 2016 hack of the Bitfinex cryptocurrency exchange. The total amount confiscated is more than $3.6 billion.

Heather Morgan and Elijah Lichtenstein, a married couple, were implicated in the money laundering. In their case, the confiscation of the crypto was relatively straightforward. Lichtenstein stored the keys to the cryptocurrency wallets in the cloud, but that didn't stop law enforcement from getting their hands on the right information after confiscating the carriers from the suspect.

That is, here law enforcers trivialised the keys, which gave access to the digital assets. Which means the seizure was done manually.

Bitfinex exchange

The second notable incident was the seizure of millions of dollars worth of crypto last week by UK police. In doing so, $5 million was returned to the victims of an “international fraud scheme” by the police. All told, UK government authorities have managed to confiscate around $435 million in crypto until January 2022.

However, the UK and the US have different rules when it comes to such seizures. Under the UK Proceeds of Crime Act, cryptocurrency is classified as property, not cash. Which means law enforcement agencies must wait until a suspect has been convicted before confiscating the coins. If they were considered cash, they could be confiscated simply on suspicion of involvement in criminal activity.

Protests in Canada

In other cases, governments simply cannot access the cryptocurrency they are pursuing – for example, if the funds are in cryptocurrency wallets that are not subject to storage, where there is no third party, i.e. cryptocurrency exchanges or similar services. In such cases, the funds are simply frozen.


We believe that these cases are a clear reminder that cryptocurrencies are not the best tool for criminals, as officials and bankers often say. Because digital asset transactions leave traces on the blockchain forever, they will surely be traceable. The situation with crypto-exchanges is much simpler: the coins on them are quite successfully frozen after a request by the relevant authorities.