Centre mulls ways to liquidate ill-gotten crypto assets

The Union ministry of home affairs (MHA) is studying the American model and practices in Europe to deal with crypto wallets that have been frozen by enforcement agencies during investigations. The move is despite New Delhi being averse to recognising crypto as legal tender and the ongoing debate at G20 for globally coordinated regulation of these assets.

“In countries like the US, there are provisions for a financial authority to take over assets in a convict’s frozen crypto wallet after the culmination of trials. However, since there is no such policy in our country yet, such assets remain frozen indefinitely,”an official from an investigating agency said. He added that the MHA, in coordination with legal experts, was in the process of formulating a policy to deal with frozen crypto and darknet accounts.

In the US, crypto wallets created of ill-gotten money are finally taken over by the government. Many European countries including France too take possession of the ill-gotten crypto assets, even as the EU is still to pronounce its stand on the status of bitcoin as a currency. India has made it clear cryptocurrencies cannot be treated as sovereign currencies, but has refrained from banning blockchain technology, which has many legitimate end uses. The Reserve Bank of India has repeatedly denounced cryptos, saying these are pure;y speculative in nature and a serious challenge to financial stability. It, however, has run pilots of digital version of the Indian rupee, as a central bank digital currency (CBDC), and wants to launch it not only in the country but promotes it for use in cross border transactions.

• Indian probe agencies’ dilemma stems from the fact that though trading in cryptocurrencies is allowed in India, the status of legal tender has not been given to them. “This raises the question whether the government can take over or maintain assets which are not legally recognised. Or can there be a way the government can control or liquidate the virtual assets,” said another official.

The virtual money, transferred and encashed through wallets by criminals, has emerged as one of the preferred mode of online payments linked to illegal deals in firearms, contraband and other anti-national activities as it is perceived to be “secure” by criminals, said officials.  An investigator said in normal cases where seizures include physical drugs or cash, these are kept in stores or police strong-rooms till the criminal case’s court hearing is completed. In case funds in a bank account are used for crime-related activities, it is frozen and at the end of the court trial, the money is shifted to a government account. “But in case of cryptos, there is no provision yet on how the government can take over a convict’s frozen wallet or assets.”

In addition to studying the US model on handling frozen crypto wallets, the MHA is also believed to be evaluating if enforcement agencies in India would, at some stage, need full-time crypto tracers like the ones employed by the Federal Bureau of Investigation, a source said. After a stock-taking meeting by home minister Amit Shah, the ministry has facilitated coordination between central agencies like the Financial Intelligence Unit, National Intelligence Grid (Natgrid), Narcotics Control Bureau and National Forensic Science University (NFSU) for working closely to disrupt the financial chain linked to drug trafficking and other illegal activities through online platforms and social media.

Shah also directed enforcement and intelligence agencies to work with social media platforms and tech companies to combat online crime. The NCB, for instance, works closely with Facebook, Twitter, Google and WhatsApp to share information about drug trafficking cases. The bureau is also working with these companies to develop tools and technologies to help them detect and remove drug-related content from their platforms, said an official. Over the last few months, enforcement agencies have intercepted drug traffickers in Gujarat, West Bengal and Kerala who were using darknet, Telegram and Instagram to sell drugs procured from the US, the UK, Netherlands, Poland, Pakistan, Afghanistan and Canada, said an official.