- The European Council is introducing a new measure to monitor and confiscate “unexplained assets”
- The implication for cryptocurrencies like Bitcoin and Ethereum is brought into focus.
Members of the European Council have finally agreed on the “Proposal for a Directive of the European Parliament and of the Council on asset recovery and confiscation” measure.
This proposal is aimed at the freezing and confiscation of so-called “unexplained assets” held by individuals and corporations within the EU. Markedly, the Council signed off on the proposal which was submitted by the European Commission in 2022 requesting a change to its policies on wealth confiscation while citing that the existing framework needed to be updated.
According to the Council, the directive is mainly aimed at spelling out minimum rules on tracing and identification, freezing, confiscation, and management of property.
All of these are expected to be carried out within the framework of proceedings in criminal matters and to reinforce the capacity of competent authorities to deprive criminals of the proceeds from criminal activities. The directive mandates that to achieve harmony and clarity across the European Union, property that can be frozen or seized should be “defined broadly”.
Noteworthy, this definition covers all forms of property including cryptocurrencies. It also covers legal documents or instruments that showcase title or interest, including financial instruments, and documents found in the possession of the target individual or trust. Furthermore, the directive clarified that assets can be confiscated if no proof of how they were legally acquired is provided. This also applies to assets owned by people who are associated with criminal organizations, expanding allowance to their properties which could also be seized.
Hence, owners of “unexplained assets” would have to prove beyond reasonable doubt that the value of their property is proportional to their stated income. That is, it is not “substantially disproportionate” to their lawful income, or that there is no illicit source of the property.
European Council Property Legislation: Factors For National Court Consideration
The national courts will be required to take into consideration several relevant details when trying to determine whether or not the assets in question are derived from criminal conduct activities. The available evidence and specific details, such as the fact that the property is substantially disproportionate to the lawful income of the owner will be considered in this situation.
Again, the absence of a plausible licit source of the property will be addressed. This should not be difficult to achieve, based on a statement by the European Council. Ordinarily, lawfully acquired properties can easily be accounted for via an already-designed documentation system. In a bid to also gather details, any relationship shared with people related to a criminal organization will be relevant to the national court.
Explicitly, case-by-case assessment and investigation are the recommended basis depending on the circumstances of the case. In all of these, before any unexplained assets can be seized, the court must be able to prove and be convinced that the property is derived from criminal conduct.
Negotiations with the European Parliament are expected to begin in earnest seeing that the European Council has agreed on the directive.
Implication for Crypto- Is this End for Bitcoin?
It is not yet certain what these new asset confiscation measures would mean for cryptocurrencies like Bitcoin (BTC), and Ethereum (ETH) but assuredly, this will not be the end of the growing asset class.
The European Union has a very defined recognition of these cryptocurrencies and as such, is creating a whole new framework through Markets in Crypto Assets (MiCA) which has been passed by the EU tripartite body and awaiting implementation.
With crypto still susceptible to embrace by criminals, assets acquired in illegal means outside mining, validation, and trading amongst others may be subject to confiscation, but the modalities will have to be adequately defined before the implementation goes into effect.
