Seizing and Tokenizing Digital Assets: Russia Prepares Legislative Framework for Cryptocurrency Management

The Russian Ministry of Justice has developed a draft law that classifies cryptocurrencies as property, allowing for their seizure and confiscation. TASS reports this, citing Deputy Minister Vadim Fedorov.

«At the same time, we propose to establish special requirements aimed at ensuring the safety of these assets. Depending on the specifics of the particular digital currency, investigators will be able to seize the physical storage device containing access codes or request the court to impose a ban on transactions,» the official said.

According to Fedorov, authorities intend to involve specialists in relevant procedural actions who will «identify the necessary measures to safeguard digital currency for subsequent confiscation or satisfaction of claims by victims.»

He additionally mentioned that the document is already being prepared for its first reading in the State Duma.

However, the deputy minister acknowledged issues concerning the confiscation and seizure of digital currency:

«The appeal of this type of asset to criminals is due to several factors, primarily its anonymity and lack of centralized oversight. Digital currency cannot be physically seized and stored in a safe, unlike cash and valuables.»

The Ministry of Finance has suggested allowing the circulation of seized digital assets through an experimental legal regime.

Among the potential gaps, an expert highlighted excerpts from the explanatory note to the document. Specifically, in cases where access to a hot or cold wallet is unavailable, the only viable option is «the seizure of the physical device containing the digital currency or the access codes, to prevent any transactions with the digital currency,» rather than the seizure of the digital currency itself.

Furthermore, the document states that «the aims of protecting digital currency cannot be achieved solely through the seizure (arrest) of the physical device or its transfer to an address, due to the possibility that access codes to the digital currency may be held by third parties or through backup methods to restore rights to the digital currency.»

Representatives from the legal agency Cartesius shared their views on the bill in a Telegram channel. They mentioned that investigators will have the right to confiscate devices holding private keys, including hardware wallets and hard drives, or block cryptocurrency transactions on exchanges via court orders.

«This bill closes a gap in the legislation: currently, courts can only recognize cryptocurrencies as property in isolated cases (for instance, during bankruptcy), but there is no unified approach,» the lawyers explained.

Experts highlighted the issue of anonymity as one of the «pitfalls» of the bill—proving a wallet’s ownership to allow for seizure is challenging without access to exchange data or blockchain de-anonymization. Moreover, Russian law enforcement will only be able to demand the freezing of assets from platforms operating within Russia or friendly jurisdictions such as China and the CIS.

«No one is even discussing decentralized exchanges; it’s too complex, and it’s easier to officially prohibit access to them,» Cartesius added.

Olga Tisen, head of the legal department at Rosfinmonitoring, stated that the anonymity of cryptocurrency transactions is a «myth.» She explained that cryptocurrency exchanges collaborate with law enforcement, providing information about wallet owners upon request.

«As you know, there is currently no legislative framework regulating the activities of cryptocurrency exchanges and exchangers in Russia, and they operate outside legal oversight. However, this does not mean they do not verify the owners of cryptocurrency wallets. It is now openly stated that they provide information upon request from law enforcement and government bodies regarding the owners of cryptocurrency wallets and all information tied to the identifier code, i.e., the public cryptocurrency key linked to the digital wallet,» Tisen noted.

She clarified that cryptocurrency transactions are not considered bank secrecy, and obtaining information on wallet owners does not require court orders.

«You can visit the Binance website right now and see that they have created a separate section for interactions with Russian law enforcement. This confirms they are actively cooperating with the authorities and providing information about cryptocurrency wallet owners. This is related to international standards,» she concluded.

The Ministry of Finance of the Russian Federation reported that a draft law on the tokenization of real sector assets is being prepared under an experimental legal regime.

«Last year, we received a directive from the Prime Minister to prepare a concept for the tokenization of real sector assets. To date, we have developed a draft federal law that is moving through interdepartmental coordination, which will enable the start of the tokenization process under the experimental legal regime,» added Aleksey Yakovlev, the director of the department of financial policy at the regulator.

It is worth recalling that in April, Russian authorities announced the launch of a cryptocurrency exchange aimed at super-qualified investors.