Schedules Schedule 9 – Cryptoassets: civil recovery Part 1 – Amendments of Part 5 of the Proceeds of Crime Act 2002 Chapter 3D: Recovery of cryptoassets: freezing orders
Sections 303Z35 to 303Z40 insert, into Part 5 of POCA, new Chapter 3D, which makes provision for the freezing and forfeiture of cryptoassets, held by a third party, in crypto wallets, where the assets are recoverable property, or are intended for use in unlawful conduct ("unlawful conduct" is defined in section 241 of POCA and "crypto wallet" is defined in new section 303Z20 of POCA).
	Section 303Z35(1) defines "cryptoasset exchange provider"; "custodian wallet provider"; "cryptoasset service provider". Subsection (3) provides that the definition of a "cryptoasset exchange provider" includes firms or sole practitioners who provide exchange services involving cryptoassets, or rights to or interests in cryptoassets, in the course of their business. This section also provides that the Secretary of State, following consultation with Scottish Minister and the Department of Justice Northern Ireland, may by regulations amend the definitions in this section.
	Section 303Z36 provides that the powers to seek a "crypto wallet freezing order" are exercisable by an enforcement officer (defined in section 303Z20) if there are reasonable grounds to suspect that the crypto wallet administered by a "UK-connected cryptoasset service provider" contains recoverable property, or property that is intended for use in unlawful conduct. Subsection (3) provides that an enforcement officer may not apply for a crypto wallet freezing order unless authorised to do so by a senior officer (defined in section 303Z20). Subsection (7) restricts SFO officers’ and AFIs’ use of the powers in relation to Scotland. A crypto wallet freezing order can be made without notice, if notice of the application would prejudice the taking of any steps to later forfeit cryptoassets under Part 5 of POCA.
	Section 303Z36(6) provides that an application for an order to freeze a crypto wallet may be combined with an application for an account freezing order where a single entity is both a relevant financial institution (within the meaning of 303Z1 of POCA) and maintains for the same person both cryptoassets and money (above the minimum amount specified in 303Z8-currently set at £1000). The definition of a "UK-connected cryptoasset service provider" is found in subsection (8) and (9) and includes entities which:
Have a registered or head office in the United Kingdom and their day-to-day affairs are carried out by that office or another establishment in the United Kingdom.
Have terms and conditions with the persons to whom they provide services which provide for a legal dispute to be litigated in the United Kingdom courts.
Hold data in the United Kingdom relating to the persons to whom they provide services.
	Section 303Z37 specifies that a judicial authority may make a crypto wallet freezing order if satisfied that the crypto wallet contains recoverable property, or property that is intended for use in unlawful conduct. A crypto wallet freezing order prohibits each person by or for whom the wallet is operated from making withdrawals or payments or using the wallet in any other way, unless permitted under the exclusions authorised by the court (in accordance with section 303Z39). Any cryptoassets frozen in a wallet remain in the custody of the cryptoasset service provider while an order remains in place. Subsection (3) specifies the circumstances in which a crypto wallet freezing order ceases to have effect.
	Subsections (4) to (7) provide the maximum period permitted for a judicial authority to freeze a crypto wallet. Subsection (4) authorises the freezing of the crypto wallet for up to a maximum of two years from date of the freezing order, except that under subsection (5) the freezing order may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoassets, and that request is outstanding.
	Section 303Z37(8) provides that a crypto wallet freezing order must make provision for persons affected by the freezing (that will include persons by or for whom the wallet is administered, similar to an account holder at a bank) to be notified of the order.
	Section 303Z38 confers the powers on a judicial authority to vary, set aside, or recall a crypto wallet freezing order at any time, including upon application by any person affected by such an order. The power to apply for an order may not be exercised by an enforcement officer unless authorised to do so by a senior officer (defined by 303Z20). Subsection (3) provides that any party likely to be impacted by a decision to vary or set aside a crypto wallet freezing order must have an opportunity to consider the implications of such order and be able to make representations, if so desired.
	Section 303Z39 confers a general power on a judicial authority to make exclusions from the restriction on activity on the wallet. Subsection (2) specifies that exclusions may be granted, in particular, for the purpose of meeting reasonable living expenses or to allow a person to carry on a business, trade, or occupation. For example, this would allow a court to make a freezing order that applies to a proportion of the cryptoassets in a wallet – those which are regarded as recoverable property - while allowing the business to continue to use the remainder of the cryptoassets. Subsection (5) also permits exclusions for legal expenses, except in Scotland (as detailed in subsection (7)).
	Section 303Z40 provides the powers for a judicial authority to stay proceedings (or, in Scotland, sist), at any stage, once a crypto wallet freezing order is made. The court may also order that the proceedings can continue on any terms it thinks are appropriate.