Schedules Schedule 8 – Cryptoassets: confiscation orders Part 1 – England and Wales
Paragraph 1 provides that Part 1 of Schedule 8 to the Act amends Part 2 of the Proceeds of Crime Act 2002 (POCA) (confiscation: England and Wales).
	Paragraph 2 removes sections 47B(2)(b) and 47B(3)(b) from POCA. This removes the requirement in the first and second conditions of section 47B for a person to have been arrested for an offence before property may be seized under the power conferred by section 47C of POCA.
	Paragraph 3 amends section 47C of POCA (power to seize property) in order to support the seizure of "cryptoassets" by appropriate officers. "Cryptoasset" is given the meaning provided in new section 84A(1) of POCA. Sub-paragraph (3) inserts subsections (5A) to (5F) into section 47C and sub-paragraph (2) amends subsection (2) of that section.
	Subsections (5A) and (5B) of section 47C introduce the concept of a "cryptoasset-related item" as a new class of seizable property. Such items are described in subsection (5B) as property that is, or that contains or gives access to any information that is, likely to assist in the seizure of any cryptoassets under the power in this section. That definition would cover a number of different types of property. For example, it could include pieces of paper that have a cryptoasset recovery seed phrase written on them, an electronic hardware wallet (these tend to be similar in appearance and operation to a USB pen-drive), or a piece of electronic hardware such as a mobile phone, tablet computer, laptop computer or desktop computer that has relevant information on it, or which has an application which gives the user control over a software cryptoasset wallet. Subsection (5A) allows an appropriate officer to seize any free property if he or she has reasonable grounds to suspect that such property is a cryptoasset-related item. Paragraph 3(2) amends section 47C(2) so that the restriction in that subsection preventing officers seizing cash or exempt property only applies to seizures under to subsection (1), and does not apply to the seizure of cryptoasset-related items under subsection (5A).
	Subsection (5C) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an appropriate officer. "Crypto wallet" has the meaning given in new section 84A(2) of POCA.
	Subsection (5D) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
	Subsection (5E) limits the power in subsection (5D). It provides that the power in subsection (5D) does not authorise an officer to require a person to provide information that is subject to legal professional privilege.
	Subsection (5F) provides that any information obtained from a cryptoasset-related item, seized using the powers conferred under section 47C(5A), may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure of cryptoassets (including their transfer to a crypto wallet controlled by an appropriate officer).
	Paragraph 4 amends section 47R(3)(b) so that the detention condition in section 47R(2) can also be met where there are reasonable grounds to suspect that the property is a cryptoasset-related item (and so long as any of the conditions in section 47B are met).
	Paragraphs 5 and 6 amend the detention of property provisions in sections 47K and 47L of POCA. Paragraph 5 inserts subsections (5) and (6) into section 47K. Paragraph 6 inserts subsections (4) and (5) into section 47L. They provide for the further detention of cryptoasset-related items which are exempt property, pending the making or variation of a restraint order. Here, "exempt property" is that which is necessary either: for the holder of the property’s employment, business, or vocation; or for satisfying the basic domestic needs of them or their family. Further detention in these circumstances must be authorised by a "senior officer", which has the meaning given in section 47G(3).
	Paragraph 7 amends section 47M of POCA. It inserts provision for the magistrates’ court to make an order authorising the further detention of cryptoasset-related items. Such orders may be sought by officers in situations where seized property is not subject to a restraint order, and no application has been made for a restraint order authorising its detention. Sub-paragraph (3) inserts new subsections (2A) to (2D).
	New subsection (2A) sets out the conditions which a magistrates’ court must (in most circumstances) be satisfied of before making a further detention in respect of cryptoasset-related items.
	Subsection (2B) sets out an extra condition where the cryptoasset-related item is "exempt property". In those cases, the magistrates’ court must also be satisfied that the officer applying for the order for further detention is working diligently and expeditiously to determine whether the property in question is a cryptoasset-related item. Or, if it has already been established that it is such an item, the court must be satisfied that the officer is working diligently and expeditiously to seize any related cryptoassets using it.
	Subsection (2C) sets the maximum period for which a magistrates’ court can order the further detention of cryptoasset-related items. Cryptoasset-related items which are not exempt property may be further detained for up to a period of six months, whereas cryptoasset related items which are exempt property may only be further detained for a period of up to 14 days. Both periods of detention can be renewed by a further order where the relevant conditions continue to be met.
	Paragraph 8 inserts subsections (6) to (9) into section 47R of POCA. It makes provision to deal with property which has been released, but where there is no intention on the part of the owner to collect it. Property which is seized under Part 2 of POCA with a view to realising it will always be seized on the basis of officers perceiving it to have a monetary value. Hence, if investigations or proceedings cease and property is released back to the owner, then they have an incentive to collect it. With the introduction of powers to seize cryptoasset-related items, property may be seized which might have no value, or may only have a nominal value. It is therefore foreseeable that a defendant may not want to collect such items. Subsection (6) makes provision for officers to retain, dispose of or destroy such property if it is not collected within a year of its release. But under subsection (7) officers may only do so where they have approval from a senior officer and have taken reasonable steps to notify people with an interest in the property of its release.
	Paragraphs 9 to 17 make provision about the powers of the court to enforce confiscation orders. Principally, the provisions address powers of the court to order the realisation and payment into court (or destruction of) of cryptoassets. They also make connected provision in relation to enforcement receiverships, and enforcement in respect of money held in accounts maintained with electronic money institutions and payment institutions.
	Paragraph 9 amends section 10A of POCA, which confers on the Crown Court a power to make a determination as to the extent of the defendant’s interest in particular property. Paragraph 9 ensures that any determination as to the extent of the defendant’s interest in a particular cryptoasset is binding on a court which later authorises the destruction of the cryptoasset, using the powers in section 67AA which are inserted by paragraph 13.
	Paragraph 10 expands the powers which the Crown Court may confer on enforcement receivers in section 51 of POCA. It includes provision for the destruction of cryptoassets which are subject to an enforcement receivership. The court may only confer such a power on an enforcement receiver where it is either not reasonably practicable for the enforcement receiver to arrange for the realisation the cryptoassets in question, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (having regard in particular to how likely it is that the re-entry of the cryptoassets into circulation would facilitate criminal conduct by any person). The realisation of a particular cryptoasset may be contrary to the public interest in cases where it is (or is part of a class of cryptoassets which are) used predominantly or exclusively for criminal purposes such as money laundering. Subsection (9B) provides that detained cryptoassets may only be destroyed up to the amount outstanding under the confiscation order. Subsection (9C) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
	Paragraph 11 amends section 67 of POCA, to enable a magistrates’ court to order a "relevant financial institution" to pay a sum over to the court on account of money which is payable by a defendant under a confiscation order. A relevant financial institution means a bank, building society, electronic money institution or a payment institution. Previously the powers were only available in relation to bank and building society accounts.
	Paragraph 12 inserts new section 67ZA into POCA. Section 67ZA is inserted to make similar provision in relation to cryptoassets held with "cryptoasset service provider" as is already made in section 67 for money held with banks and building societies (now "relevant financial institutions" as a result of paragraph 11). A cryptoasset service provider is a businesses that administer so-called "crypto wallets" which provide access to cryptoassets for their customers and is defined in new section 67ZB(3). The definition is amendable by regulations made under section 67ZB(5). "Crypto wallet" is defined in new section 84A(2). The court can only make an order under section 67ZA where such a provider has a UK connection. The conditions setting out the relevant connections are set out in new section 67ZB(1) and (2). Section 67ZA will enable a magistrates’ court to order said businesses to realise cryptoassets and pay the resulting sum over to the court. Subsection (5) makes provision for circumstances where a crypto wallet may be held in the name of a person other than the person against whom the confiscation order is made (for example a spouse or company), but where the person against whom the confiscation order is made nonetheless holds an interest in some or all of those cryptoassets. In those circumstances, subsection (5) requires the court to have regard to a section 10A determination of interests before making an order. Subsection (6) contains equivalent provision to existing section 67 to enable the magistrates’ court to fine non-complying businesses up to £5,000, and for the Secretary of State to amend that sum by order in order to take account of changes in the value of money. Subsection (8) absolves a business captured by the provisions from liability for realising a sum different to that specified in an order provided that it took reasonable steps to obtain proceeds equal to the values specified.
	Paragraph 13 inserts new section 67AA into POCA. It enables the magistrates’ court, as part of the confiscation order enforcement process, to order that seized cryptoassets may be destroyed. This is to cater for the scenario whereby those assets would ordinarily be realised, but in the circumstances it is either not reasonably practicable to do so (for example where no legitimate cryptoasset service provider offers the option of realising that particular type of cryptoasset on their platforms), or where there are reasonable grounds to believe that the realization of the cryptoassets would be contrary to the public interest (similarly to the situations described in the note on paragraph 10). Subsection (3)(b) provides that seized cryptoassets should only be destroyed up to the amount outstanding under the confiscation order. New subsection (4) affords third parties who have, or may have, an interest in the property the right to make representations before an order is made. Subsection (5) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
	Paragraph 14 amends section 67C, which provides a right of appeal to the Crown Court against a magistrates’ court’s order authorising the sale of the property, to take account of new sections 67ZA and 67AA. The right of appeal is available to third parties affected by the order but not to the person against whom the confiscation order is made. There is also a right of appeal for an appropriate officer to appeal against a magistrates’ court’s decision not to authorise the sale of the property. In addition, the officer may appeal against a decision by the magistrates’ court not to award costs or against the amount of costs awarded under new section 67B. Sub-paragraph (4) also ensures that a person against whom the confiscation order is made, is not afforded the right to appeal a section 67A order in relation property held by them.
	Paragraph 15 amends section 67D – which specifies how sums from the sale of the property authorised under section 67A are to be disposed of by the appropriate officer – so that it similarly applies in relation to the proceeds of cryptoassets realised under new section 67AA. Accordingly, any sums from the sale of cryptoassets must first meet the expenses of an insolvency practitioner that are payable under section 432 of POCA. They must then be used to meet any payments directed by the court and the remainder must be remitted to the designated officer of the magistrates’ court responsible for enforcing the confiscation order. Where the confiscation order has been fully paid and the officer has any sums remaining, section 67D(3) requires the appropriate officer to distribute that money as directed by the court.
	Paragraph 17 amends section 69 of POCA. Section 69 sets out a number of general steers to the court and receivers in the exercise of various powers under Part 2. Specifically, subsection (2)(a) provides that the court must exercise its powers with a view to preserving the value of assets with a view to their ultimate realisation to satisfy any confiscation order made against the defendant. New subsection (2A) disapplies the steer in subsection (2)(a) in relation to the new powers for the courts to authorise the destruction of cryptoassets, in appropriate cases.
	Paragraph 18 inserts new section 84A into POCA which defines terms introduced by the preceding paragraphs.