Finland Mandates Cold Storage, Public Auctions for Seized Bitcoins

Finland’s government released new guidelines on Tuesday that set out how law enforcement officials must handle cryptocurrencies they confiscate.

The official agencies in charge of storing the cryptocurrencies will now be prohibited from placing the funds on exchanges, and must instead keep them offline and inaccessible from the internet, a Bloomberg report states, citing official Treasury documents.

The ruling effectively means the agencies involved will need to identify some form of cold storage solution, in which they would maintain a wallet that does not have an active Web connection. Bloomberg said the Helsinki customs office would not indicate how it has been storing the cryptocurrencies until now.

The news source states that Finland’s authorities currently hold around 2,000 BTC that have been confiscated in raids since 2016, as per data from the customs office. At today’s prices, the 2,000 BTC is worth around $23 million, according to CoinDesk’s Bitcoin Price Index.

As reported by CoinDesk, in 2016, customs agents in Finland seized bitcoin and other items worth about €1 million at the time, in connection with the operation of an online dark market called Valhalla.

Asset treatment

The new guidelines go on to indicate that authorities must also treat cryptocurrencies as assets, rather than currencies.

Once a court has ruled that the funds will not be returned to the owner, Bloomberg says, they may be exchanged for euros. The document recommends sales should take place through public auctions, rather than on cryptocurrency exchanges, for security reasons.

Other governments have faced the quandary of what to do with cryptocurrencies they confiscate – and as seen in the U.S., the solution is often simply to auction them off publicly.

While it’s not clear how they must store cryptocurrencies, U.S. authorities have held a number of auctions for seized bitcoins in recent years.

Most notable, perhaps, were the sales of cryptocurrency holdings seized from the now-defunct dark market Silk Road. One such sale held in mid-2014 offered 29,656 BTC (won by investor Tim Draper), and a later auction of 44,341 BTC took place in October 2015.

Combined, those 73,997 bitcoin would be worth $853 million at today’s prices.

Bitcoin and handcuffs image via Shutterstock