Topic: [2021-07-09] Russia Drafting Law on Confiscation of Crypto Assets (Read 318 times)

That's not a bad idea either, but it becomes increasingly difficult to do and increasingly likely you will make a mistake as time goes on. You have to be very sure of your set up to regularly use two sets of coins and never link them even via blockchain evidence, let alone via using the same servers, block explorers, IP addresses, accounts, etc. You ideally need two separate computers on two different internet connections hosting two different sets of wallets, and to be absolutely sure you never send coins from both sets to the same account or service.

If you are a day trader, then KYC is pretty much unavoidable. Such is the price you pay for day trading. But given that if you are day trading then you are storing your coins on a centralized exchange the majority of the time, you have already completed KYC on that exchange and that exchange is already reporting your activities to your government, then you have little more to lose by also linking your withdrawal address to your KYC details.

However, you are risking for the exchange to freeze your account if they do not believe you or if they were really using Chainalysis. It might be better to keep your KYC coins separate.

Also, it is certainly easier to move small amounts of coins in the cryptospace. I reckon not completing KYC might be impossible for some traders who trade more than $10k daily.

There is no doubt that Russia is the greatest country when it comes to IT which is basically the bedrock upon which blockchain technology and Cryptocurrency operates. But I doubt they have the technology to clamp down on the use of cryptocurrency in their country most especially with lots of exchanges now providing peer to peer services.

Then send from that address to a brand new one, and then to a mixer. If anyone asks, you can say that brand new address was you selling the coins peer to peer, or spending them with a merchant, or gifting them to a friend, or donating to a charity, or whatever. Then after they've been mixed you can do what you like with them.

Well, the obvious answer is to just not complete KYC In the first place. I have never completed KYC and never used a centralized exchange, and yet I'd bet that I buy, trade, spend, and use bitcoin more frequently than 90% of bitcoin users. It's not difficulty to avoid centralized entities once you get the hang of peer to peer exchanges.

I am quite certain that the regulators will make exchanges require their users to use only one public key to transact with the exchange. This public key will be marked with your name on it upon KYC and shared with the government and other exchanges.

Also, users should be careful and make certain not to taint their KYC public key and coins if the travel rule pushes those users to decentralized exchanges and mixers.

Given that most people use centralized exchanges in which they have completed KYC, and centralized exchanges report to the IRS and are starting to report to other countries' tax agencies as well, then most people are going to be on the radar of their relevant tax agency anyway. I suppose if they can monitor individual wallets then it lets them keep track of tax on every individual buy, sell, trade, or exchange, as opposed to just ones conducted through said centralized exchanges.

I agree, but I would hope the government and various agencies monitoring every minutiae of your entire financial history, holdings, transactions, purchases, etc., would be enough to convince a few more people at least that they might want to start paying attention to their privacy.

True, but also fine by me. I don't want fiat gains; I want to spend my bitcoin. I spend bitcoin for goods or services near enough every day, but I couldn't tell you the last time I sold any crypto for fiat.

And that'll surely lead to "more" data breaches ^{[unfortunately]} when that ridiculous proposal becomes law in two years' time.

By the look of things, in the next 5 years, they'll probably introduce a new system to handle our own transactions instead of us ^{[each time that we want to make a transaction, we'll be forced to call them and give them an in-depth explanation]}.
^{- That's probably what they want [SMH]!}

What they will achieve with these rules is that most of the people in bitcoin and crypto in general would be free to use it but will be easy to track for the sake of taxes. This is going to be the reality in the coming years and I doubt that too many people will make the shift to mixers and Dexes. Most who will do so are those who have significant holdings from being early investors or hodlers. Those people, if they exist, will anyways continue to be bulwarks of a potential struggle for privacy in the forthcoming future. Yet, it has been shown that when faced with legalities, most people will choose to take the easier route and comply rather than go rambo-mode. Like what Cobra had to do in removing the whitepaper in order to preserve his anonymity.

The government cannot stop anybody from using bitcoin and keeping it private but, unfortunately, they sure can stop everyone from using the world of crypto for fiat gains without being tracked and taxed.

So web wallets and centralized exchanges will have to enforce KYC on every user, but does this apply to self hosted wallets? Are they going to prohibit people from running Bitcoin Core or Electrum? Are they going to prohibit sites from even hosting the software? What about if I manually generate a private key and manually turn that in to an address? Is that illegal too?

What about hardware wallet sellers? Will they have to collect KYC and link it to a unique identifier in each device?

What complete nonsense. All they will actually achieve with these kinds of rules is to push more and more users to decentralized exchanges, mixers, and holding their coins in their own wallets.

@xenon131. Are you from Russia? You might be the person to give us news updates. In any case, I speculate this proposed law might also include ensuring the traceablity of bitcoin and altcoin transactions by copying the European Union’s travel rule for cryptocoin transactions.

It might appear presently as fud, however, anything might be possible after witnessing China’s actions. The regulators around the world are becoming very aggressive against the cryptospace.



Companies that transfer bitcoin or other cryptoassets must collect details of senders and recipients to help authorities crack down on dirty money, EU policymakers proposed on Tuesday in the latest efforts to tighten regulation of the sector.

The law proposed by the European Commission, the EU executive, would apply what is known as the travel rule to crypto transactions to make them traceable.

Providing anonymous crypto-asset wallets will also be prohibited, just as anonymous bank accounts are already banned under EU anti-money laundering rules.

Source https://www.reuters.com/technology/eu-tighten-rules-cryptoasset-transfers-2021-07-20/

He said noting new for Russian citizens.  Russian  Digital Financial Assets Act (DFAA) equates crypto assets  to property but not to currency. This means all property including crypto can be confiscated if the court finds that there are grounds for such confiscation. Russian legislation is very fragmented. There are bunch of state bodies (such as State Duma, the Russian Government, the Procurator General of Russia etc.) involved into this legislation and right now the Procurator-General's office is trying to fit their by-laws  to federal laws that are   already fully in force.

This decision will not be of great practical importance. These changes are of a formal nature and procedurally in the course of criminal proceedings decide the question of how to deal with cryptocurrency if it is associated with a crime and the known secret keys from wallets. I think that there will not be so many such cases, since it is quite difficult for the investigation and the court to obtain the secret keys from cryptocurrency wallets.
The positive side of this law is manifested in the fact that cryptocurrency is recognized as property and the norms of the civil code on the protection of the rights of cryptocurrency owners apply to it.

They will "help" you to remember.

Your only hope in any such scenario is that you are using multiple wallets and that you have managed to keep some of them hidden and unlinked (via blockchain analysis) to your other wallets. Whether these are entirely separate wallets using a different seed phrase, or wallets using additional passphrases but the same seed phrase (a popular method if you use hardware wallets), it's up to you. But the basic principle is that you have some wallets and coins you can hand over in the event of an attack/coercion, and you keep your other coins hidden and unknown to the attacker. You do need the coins you hand over to be enough to be plausible that they are all you have. Handing over a couple of wallets with 1 mBTC in them each is unlikely to satisfy the attacker.

The news about possibility of bitcoin confiscation by a communist government must have rattled the people there. Doesn't the govt say that it is for preventing bribes? Basically if those in power decides to do something against you as an individual, there is little that can help you. It does not matter if you are in a country like Russia or in a free democracy. The example pointed by Vishnu are scary but similar stuff can happen in democracies if we are not vigilante enough. It doesn't take long for an autocratic leader and government to start talking about stuff like "limitations to freedom of speech" and "Sedition".

Soon enough, the tumble starts.

There is little anybody can do for the people who live under such regimes. They can only help themselves. Living in democracies can often make you unaware of the fact that the biggest land-masses like China and Russia have people living their lives under restrictions and limitations prescribed by those in power. There can be no yearning for the truth and the rise of creative thought to its highest limits. Everything you express can be used against you. Feel for the people there. Hope those rulers can somehow evolve.

Well.. that's not how things work in Russia. If you don't "remember" the password to your wallet, then you will be in very big trouble. When they ask for your money, just give them and quit. Else really bad things may happen to you. Do you know what happened to Vasily Aleksanyan (former Yukos VP)? He was arrested in 2006 (at the age of 34), after Yukos refused a deal from the Russian government. While in prison, he contracted HIV and liver cancer. He died within less than 5 years. If this can happen to someone who is so famous, imagine what can happen to some ordinary person in Russia.

This is something I never thought I would ever see, imagine the Government confiscating crypto which is suppose to be personal property....what happens when you tell them you don't remember your key or password to the wallet what will they do, put you behind bars for a non criminal case....this is extreme to say the least. Shame to whoever is spearheading this agenda!

They'll do the same things that the US and Chinese governments and that all centralized exchanges are already doing: They'll either hire blockchain analysis companies or build their own blockchain analysis software, they'll track bitcoins which have come from darknet markets or passed through addresses which are known to belong to criminals or similar, and then they'll use the KYC details people submit to exchanges and other services or device fingerprinting or IP address or whatever to link those bitcoin transactions and addresses to real individuals. Whether or not that individual was actually involved in the crime or just received these "tainted" bitcoin in an honest transaction is probably irrelevant to the Russian government.

Time for Russian citizens to start mixing their coins and avoiding centralized exchanges if they don't already.

You keep your personal details private, you don't complete KYC, you don't link your wallets or addresses to your real identity, our operate through Tor, and you mix your coins. The government can't taint or seize your wallet if they don't know it exists. Although as I said previously in this thread, it is nearly impossible to be completely anonymous on the internet. You probably just need to be anonymous enough that you don't get caught in the mass surveillance programs. If you are specifically targeted, for example as a political dissident, then they will likely uncover your coins and wallets regardless of what you do.

I do not know. We also do not know what the Russian government wants out of this proposed law. Do they want it be a law that would give them the authority to detain any suspect for a period of time for questioning? Whatever it may be, this clearly will be very dangerous law for users in Russia because how would they know if their utxos are clean or tainted? The Russian goverment themselves can taint your wallet and add it to their blacklist.

Russia is like a mafia state run by Putin and his cronies. Private businesses are allowed to operate, only if they provide commissions to the ruling party members. And as far as you provide these commissions, you are allowed to do anything you want - drugs trafficking, extortion, sex slavery, hacking, manufacturing of counterfeits.etc. Once I thought that Putin was different from Boris Yeltsin and he cared about the ordinary Russian people. But I was wrong. He turned out to be even worse when compared to Yeltsin. The destruction of Russia was started by Yeltsin and Putin completed it.

The question is: how will they know if the cryptocurrency is a result of a crime? Basing on what I read here, this legislation is not actually banning the whole thing but aiding the prosecution of someone who committed a crime and is using cryptocurrency in doing so. But then again, since we are talking here of Russia where laws are not really respected and can be use to advance the agenda of those in power, this can be a sign to be cautious if one is involved with cryptocurrency. Better be careful than sorry.

the most pathetic of all this is that these measures come from a country where the president wants to die in power, where the president does not want democracy, a country where there are corrupt people in power who will do anything to stay in power. this argument the russian government uses should feel ashamed before they think about telling this to the public, who are they protecting? people? they are definitely not protecting people, they just hate decentralization, freedom and democracy

Yes, that's true, but the problem is that very few bitcoin are actually truly anonymous, the majority of people are very lax with their privacy, and even people who think they are being great with their privacy are probably still slipping up somewhere. It is nigh impossible to be truly anonymous on the internet, let alone with something with an immutable ledger of all activities such as bitcoin.

Absolutely, but it is unlikely that backing up your seed phrase on to paper will be the thing that compromises your privacy. Much more likely someone will track the bitcoin you own through blockchain analysis or similar. They might not know where or how you are storing them, but they will be pretty certain they belong to you and will simply coerce you to hand over the details.

In any communist country for that matter confiscation by the government is a real threat. Who knows if you have received some money from someone who was a gambler or a scammer and as per the money laundering law you know are also considered as a part of this whole act? Will you be given a chance to explain that this transaction you made was for a legitimate cause? Even if you are heard what are the chances that this would be believed? Confiscation is a really huge blunder that these governments are going to do, this way almost anyone can be caught into the whole act even if he is entirely innocent.Oh C'mon, privacy is a myth in today's world, you are leaving tons of data every day on each and every website that you hover on, forget about any government I think even a normal ethical hacker would be able to find identity of 90% of people on this forum.

And if it is getting anywhere near the point where they are going to be knocking down doors and using coercion on people to confiscate bitcoin, it is time to cross the border before it begins and borders are shut down.  One would think there would be some warnings about what is to come.  In Cyprus in 2013, there was no overt warning about the coming capital controls and bank seizures, but there were a lot of warning signs.

The problem is once you hit the "Cyprus 2013" scenario, it is probably too late to buy bitcoin or much else, so it is imperative for people like those in Hong Kong, Taiwan etc to purchase them before that so that if it is getting to the point of capital controls and eventually border controls for people, one has a backup plan in place.

In fact, I am specifically referring to the fact that IF (big if) NO ONE knows about one's bitcoin holdings there is NOTHING to be seized. Do not assume that there are KYC and exchanges in the middle.
I am solely describing the fact that, theoretically speaking, if only you know about your BTC there rest of the world is out of that.
You can have your brain wallet and move your wealth across nations and borders and no fiat currency limit will stop you.
After all, you have words in your head and UTXOs on the blockchain.

It is really funny. In Russia, most of the criminal activity (ransomware, human trafficking, drugs trade.etc) is being done by gangs with close links with the ruling United Russia party. I am not sure whether these gangs will face any sort of asset confiscation. On the other hand, the notoriously corrupt Russian cops may use these laws to harass regular users who have no direct links with criminal activity. Anyway, I urge users residing in Russia to re-route their transactions using Bitcoin mixers. Also, it would be better to avoid exchanges that require KYC.

And you think the Russian government needs training on how to do this?
Private keys, oh, I'm sure those private keys will prevent your suicide when you fall from the 10th floor of a 4 story high building.

The Marschall office is having more bitcoin auctions than birthday parties and I'm willing to bet that the Russian police who are not able to catch drug dealers or criminals will be able to perform miraculously at this, recovering 120% of the bitcoins in question. I wouldn't be surprised if some people will choose to donate their coins to the United Russia party just the second before unfortunately they got shot by rogue garbage men.


You've lived too much in a free country, this kind of reaction will only happen in an authoritarian regime if they will allow you to, if not there will be just obedience. Decentralized exchanges?  Just one covert operation catching a few of those dealing there and have them featured in an interview where they regret their evil doings against the bless government and the Soviet people, like this one. You see how fast freedom and all those other things start to matter less than your life?

The only good news in this crap is that we again talk about Russia, where this kind of proposal happens every year if not every month. Probably we will have this law just after a new referendum in Crimea.

In other words, they'd like to have full control over those exchanges that offer custodial services ^[ironic]...
^{- From bad to worse [SMH].}

---

I'm curious to know what they'll be doing with some of the confiscated crypto assets that nobody attempted for their retrieval

Because most people are awful when it comes to their privacy. If you have completed KYC at any exchange or centralized service, then chances are they are tracking your withdrawals and linking your withdrawals to your real name. Have you used your main email address to sign up for some competition, giveaway, or airdrop? Have you shared an address on any social media platform, any public forum (such as this one) or via any non-encrypted method of communication (email, instant messaging, SMS, etc.)? Are you using a custodial wallet, web wallet, or SPV wallet? Are you not running your own node? Do you repeatedly search for you own transactions on block explorers without going through Tor? Have you paid someone with crypto and also given them your name, email, phone number, or shipping address? Do you so much as open your wallets over public WiFi? The list goes on. All these things can potentially link your holdings to your identity.

If (and that's a big "if") no one else knows about that bitcoin, then they obviously can't seize it specifically. They can raid your house though, searching for anything which might be a seed phrase or private key, or simply "coerce" you until you tell them all they want to know. Governments around the world don't exactly have a great track record on the whole "innocent until proven guilty" thing.

How can they seize something they cannot see? That is my question!
If someone has, let's say 10 btc in cold storage and only him/her knows about that btc, how is any state with any perfect crypto bill, able to do anything about confiscating the assets?
Of course if you know somebody has got btc than you could force him/her to hand over the keys, but if there are no "visible" keys, what are they going to confiscate?

The US and Chinese governments already do all these things. Not really a big deal if Russia want in on the act as well. They can regulate centralized exchanges and force them to comply with whatever rules they like - centralized exchanges are, after all, private businesses and therefore subject to the laws of whichever jurisdictions they operate in. What they can't do is start to try to regulate bitcoin itself. As much as they bleat on about wanting to reverse transactions, censor addresses, confiscate coins, and so on, none of that is possible without completely destroying bitcoin, which they can't do either.

In the end, these kind of draconian surveillance and control laws being enforced by centralized exchanges will just force more and more users towards decentralized exchanges and privacy enhancing techniques such as mixers and coinjoins, which is ultimately a good thing.

Why new law is needed here at all?

@o_e_l_e_o. What the Russian government can do is hire a service similar to Chainalysis and blacklist certain addresses, warn exchanges of those addresses and follow those wallets’ transactions. I am not quite certain if exchanges are fearful of the Russian government enough to freeze accounts that have received transactions from blacklisted wallets, however.

Perhaps they could drop an email to US Congressman Bill Foster and ask him how he plans on making bitcoin transactions reversible, and follow the same idea to allow them to confiscate bitcoin. You can pass whatever laws you like, you cannot reverse nor confiscate bitcoin without the relevant private keys.

What an absolutely insane opinion. You think it is a step in the right direction to let governments around the world start helping themselves to other people's bitcoin? You trust Putin with the ability to just take bitcoin from your wallet because he decides you are a criminal? You trust Xi Jinping? Kim Jong-un? The whole point of bitcoin is that this can never happen, and any change to the code to allow such a thing to happen would immediately be the death of bitcoin. Thankfully, that will never happen.

Looks like a big surge in mixer traffic and coinjoins coming from Russia in the near future.

I can see it now. Any seized assets by Russia to be dust-sprayed by tainters. I thought the Bitcoin fungibility issue was done and dusted? Even Marathon Miner's given up trying to censor Bitcoin transactions deemed to be non-compliant with US regulations. If an "OFAC compliant" miner realises the futility of it all, pretty sure a state will arrive at the same conclusion more quickly.

Another concern is if your wallet has received a transaction from a tainted address without your knowledge, does the government have the right to confiscate your coins under this new law? I reckon if the Russian government were to enact such a law, they should treat cryptocoins like real currencies where the government cannot confiscate paper bills used by criminals that accidentally went to an innocent bystander’s pocket.

To show an example, if a criminal used his criminal paper bills to buy something from a store and one of those criminal paper bills went as change to an innocent customer, does it give the government the right to confiscate the paper bill from the innocent customer?

Which illegal activities?  Where physically are these illegal activities?  Which country is going to decide?

The authoritarian leaders in China night have a different view of what is illegal than the people who want to be free in Hong Kong or in the country of Taiwan.  Or the anti-liberty Biden admin in the US might have a different view than the Swiss, the people of Cayman Islands or the people of the Cook Islands.  Russian might not like someone in Ukraine or vice versa.  Unless one is advocating for a world government - which in the end will eliminate competition and destroy human liberty on the planet - this is a bad idea.

Good luck attempting to enforce that as more privacy protections come to bitcoin and other crypto, adding back doors to seize assets is as bad an idea as adding backdoors into encryption of devices.  (Or not encrypting cloud backups with on-device keys).

Edward Snowden and Julian Assange might have different views on what is illegal than the left-wing autocrats in the governments of the 5 eyes (people like Obama, Biden who went after them in the first place etc) and the people at the NSA, CIA etc.

Dude, it's Russia, they have means to enforce this and they are pretty strict when it comes enforcing laws and anything keep the order. Also, given how corruption is a mentality in Russian government, I think that we will probably see to it that they will confiscate as much cryptocurrency as much as possible.

This is a step in the right direction.Cryptocurrencies,which are obtained via illegal activities must be confiscated from the hackers/scammers.
Every normal country must have such law.The problem is that the Russian government cannot be trusted and the Russian police might confiscate cryptocurrencies,which aren't obtained via illegal activities.
The Russian court system cannot be trusted as well.If you are from Russia and the government steals your crypto coins deliberately or by accident,the Russian court will not stand by your side.

I think it's only words, and they don't have instruments to realize their thoughts.

If there are Russian users reading this, it might be good to begin learning about Monero and other anonymous coins. You cannot risk your wallets being tainted with dirty coins if it is not tainted already. Also, I know there might be some of you would who will use the argument that there was data from Chainalysis that showed only 1% of bitcoin transactions were criminal. However, you cannot trust the Russian government not to frame you or taint your wallet themselves.

This is okay if your wallet holds only a small amount. What if you are a holder of $1 million in bitcoin? You might not be 100% safe.



Russian Prosecutor General Igor Krasnov has revealed that legislative amendments are being prepared on the confiscation of crypto assets. “A serious challenge is the criminal use of cryptocurrencies in our country,” he said.

Russia is preparing amendments to the current legislation to allow for the confiscation of crypto assets found to be proceeds from crime, Tass reported Wednesday.

Krasnov said that virtual assets have become a source of income for criminals, emphasizing that cryptocurrencies are being used for corruption, including bribery. “The latency of these criminal acts has recently been aggravated by the use of crypto assets as bribes,” he asserted, adding that cryptocurrency exchanges have been used as “a way of laundering stolen funds.”

Read in full https://news.bitcoin.com/russia-drafting-law-confiscation-crypto-assets/