Policy background Cryptoassets
Cryptoassets serve as a pseudo-anonymous, low-cost, and relatively quick method to move funds globally. There are low barriers to entry, users merely need an internet-connected device to transact with cryptoassets. Given these characteristics, it is little surprise that this technology is being exploited by criminals and law enforcement are already investigating terrorist financing cases where cryptoassets have been used.
	The threat of cryptoassets being exploited by criminals is more apparent than ever before. The NCA’s National Strategic Assessment noted a particular acceleration in the criminal use of these assets during the pandemic. Further, cryptoassets are one of only a few accepted payment mechanisms most used by cyber criminals demanding payment following a ransomware attack. These attacks are increasingly common and pose a significant threat to the UK public and businesses.
	Cryptoassets have not yet become a chronic problem in the counter-terrorism space. But the use of cryptoassets is clearly an emerging trend, with law enforcement seeing their use in a number of terrorist financing cases. In particular, the use of social media platforms to fundraise and the use of cryptoassets as a method of payment is increasing.
	The ability to move property quickly, across borders, without the need for standard banking services, and often to hold it anonymously, can make these assets attractive to those engaged in economic crime and terrorist financing.
	It is the Government’s view that it is necessary to strengthen the UK’s asset recovery and counter-terrorist financing legislative frameworks to provide law enforcement agencies with the most effective and efficient powers to help seize and recover cryptoassets, in as many cases as possible. Without intervention, those assets may be used to fund further criminality or for terrorist purposes.
	To achieve this, the measures in the Act will:
Improve the criminal confiscation powers in Parts 2, 3 and 4 of POCA in relation to cryptoassets. These reforms will: enable officers to seize cryptoassets during the course of an investigation without first having arrested someone for an offence; enable officers to seize cryptoasset-related items; and enable the courts to better enforce unpaid confiscation orders against a defendant’s cryptoassets.
Bring cryptoassets within the scope of civil forfeiture powers in Part 5 of POCA 2002. These powers would be simple and user friendly for law enforcement agencies.
Ensure that forfeiture powers are accompanied by supplementary investigative powers in Part 8 of POCA, similar to investigatory powers that exist to support the forfeiture of cash, listed assets and funds in certain accounts.
Mirror the civil forfeiture related powers in Part 5 and Part 8 of POCA in counter-terrorism legislation (Schedule 1 to the Anti-Terrorism, Crime and Security Act 2001 and Schedule 6 to the Terrorism Act 2000) to provide sufficient flexibility to be able to suppress the risk that cryptoassets become increasingly used for terrorist purposes.