Cryptocurrencies have been present on the financial market for more than a decade. Rising inflation and the search for alternative sources of investment have led to a dynamic increase in interest in this form of payment and saving (also among Poles) in recent years. As a consequence, law enforcement agencies in individual countries have also begun to take an interest in virtual currencies from the perspective of legal regulation, including issues related to criminal law. Recently, information about an unusual auction in one of the Tax Offices circulated in the media – the subject was precisely the fractional value of cryptocurrency. However, this was not the first example of virtual currency enforcement in our country.</strong
Czy prokurator może „wejść” na kryptowaluty?
Cryptocurrencies in the Polish legal environment
The Polish legislator has not undertaken to comprehensively regulate virtual currencies, e.g. through a separate law on cryptocurrencies, which, it should be emphasised, does not imply their illegality. The possession and trading of virtual currencies in Poland is therefore not prohibited, and recently one can observe the appearance of individual solutions concerning cryptocurrencies in individual legal acts or administrative decisions:
- The Anti-Money Laundering and Countering the Financing of Terrorism Act, among others, defines what cryptocurrencies are and introduces a requirement to register cyber-currency activities;
- Tax interpretations recognise Bitcoin as an alternative means of payment, which is a property right and whose income from sale is taxable under the general rules;
- The Ministry of Finance has recognised Bitcoin as a contractual means of payment, which is not foreign exchange and an electronic monetary instrument.
From a criminal law point of view, virtual currencies can be treated as information, a record on an IT data carrier, IT data, or a document within the meaning of the Criminal Code.
Therefore, virtual currencies can be and sometimes are evidence, the object of an offence, a financial guarantee or finally a financial guarantee.
What is property collateral
Asset freezing is a criminal law institution vested, depending on the stage, in the court or the public prosecutor. As the name suggests, it serves to secure the enforcement of a decision by charging the property of the accused or suspect. In other words, it is intended to prevent the disposal or concealment of the assets of those facing fines or measures of a financial nature or the imposition of legal costs.
However, the execution of asset freezing cannot be arbitrary. It is required of the authority that the order issued:
- specify the object of the security,
- the amount of the security is indicated,
- the method of security is indicated.
Is asset-backed security on cryptocurrencies possible?
In theory, property security as much as possible can be established on virtual currencies. Pursuant to Article 291 § 1 of the Code of Criminal Procedure, property security is effected on the property of the accused and, although virtual currencies do not have a physical form, they fall into this category.
In reality, however, such collateral cases pose a considerable practical challenge for the authority. Securing assets on cryptocurrencies requires additional involvement due to the encrypted way in which virtual currencies are stored within online wallets, wallet-apps, or paper wallets. Even if an authority already manages to take possession of a wallet, there is another hurdle – proper digital security against loss. It is not possible to pick them up physically and simply put them in an armoured cupboard in the authority’s unit.
An example of the difficulties authorities face in this regard is a case in our western neighbours. Although the public prosecutor’s office came into possession of a BTC wallet (its address) worth around €50 million, the convicted man had forgotten the password to it. As a result, the law enforcement agency was unable to take actual procedural steps with the cryptocurrencies.
Protection of rights in the case of a security interest
It is worth remembering that state authorities happen to make security often contrary to the rules of adjudication, in an incorrect amount or simply hastily (without rational justification). In such situations, it is necessary to lodge a complaint against the decision on property security.
In addition, the execution of the property security cannot continue indefinitely. The law imposes limits, stipulating that the property security must be immediately revoked in whole or in part if the reasons for which it was applied to a certain extent cease to exist or if reasons justifying its revocation even in part arise.
What are the signs that a provision is unlawful?
| Inadequate determination of the amount and method of the security |
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| Failure to take into account the amount of the fine, penal measures, forfeiture or compensatory measures threatening the perpetrator |
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| Failure to revoke the security in whole or in part, despite the fact that the grounds have ceased to exist |
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| Deficiencies in the construction of the order |
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Individuals facing criminal proceedings need to bear in mind that virtual currencies in their possession may come under the interest of law enforcement, including under so-called ‘seizure’. In practice, however, effective asset security on digital currencies poses quite a challenge for the authorities.
Regardless of the subject matter of the asset collateral, it is worth knowing that the decisions issued often leave much to be desired in terms of form and substance. Therefore, it is always worth considering filing a complaint, which may bring measurable benefits – not excluding the complete annulment of the security.
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