The Federal Police and the National Secretariat for Public Security (SENASP) recently announced proposals for the safekeeping of cryptocurrencies seized in police operations.
The Financial Crimes Repression Division of the Federal Police proposes to send virtual assets seized during operations to brokers. The model aims to establish secure and efficient procedures for the seizure and custody of digital assets.
According to the document, published on the Ministry of Justice website, one of the central aspects of the proposal is the use of Virtual Asset Service Providers (PSAV), which will allow the guardianship and liquidation easier access to these assets, without tying private keys directly to law enforcement teams.
“Using PSAV (Virtual Asset Service Provider) prevents police teams from being personally linked to transfer keys (seeds, pins, private keys), making the virtual asset custody process more secure and efficient.”
🚨Ministry of Justice on how the police should seize #Bitcoin It is #cryptocurrencies.
Model proposed by the PF: Seize and send to broker.
“It prevents police officers from accessing wallet passwords, making the custody process more secure.” pic.twitter.com/f65HM4Z80O
— Livecoins (@livecoinsBR) November 13, 2023
Asset Recovery Working Group
The model proposed by CIBERLAB/SENASP aims to guide police authorities in investigative procedures involving virtual assets. The model includes the opening of exchange accounts at the CNPJ of the research institution, as well as measures for the conversion and settlement of virtual assets.
“The proposal aims to present an ideal custody model and procedures that can be applied by police teams that are faced with the need to seize and hold virtual assets, even temporarily, due to the launch of judicial police operations. The development of this custody model started with reflection on what could be a suitable model for the custody and settlement of these assets in light of the legislative innovation introduced by Law No. 14,478/2022 – “Law on Virtual Assets””
In the United States, it is worth remembering that the custody of seized cryptocurrencies is a process that is considered more secure. After being seized by authorities such as the FBI, DEA or IRS, cryptocurrencies are transferred to a digital walletoften stored offline with multiple passwords to protect against unauthorized access or cyber attacks.
The model presented by the National Public Security Secretariat appears to focus on liquidating assets more quickly after they have been seized, as storing cryptocurrencies with brokers carries significant risks, mainly due to their digital nature.
The biggest risk is hacking, because exchanges with large amounts of digital assets are attractive targets for cybercriminals. If an exchange is hacked, users could lose their cryptocurrencies stored there.
Another point is the safekeeping of assets. When storing cryptocurrencies with a broker, the user transfers control of the private keys, essential for accessing and transferring assets, to the broker. This means that the user is dependent on the security and integrity of the platform to access their funds.
To limit such risks, the model proposed by the PF imposes some requirements on brokers, namely:
- Approval of the regulations of the Central Bank of Brazil provided for in Law 14.478/2022, which will specifically regulate the actions of Virtual Asset Service Providers – PSAV(S);
- Prior accreditation of PSAV Virtual Asset Service Providers by the judiciary.
- Creation of judicial portfolios in PSAV(s) through legal proceedings.
- Liquidation of assets via auction promoted by PSAV(s).
The models represent a different approach to the rest of the world when dealing with virtual assets in police investigations. They are expected to provide greater security, efficiency and transparency in the process of custody and disposal of virtual assets, such as Bitcoin or other cryptocurrencies.
The implementation of the models will depend on the regulation of the Central Bank of Brazil and the creation of appropriate legal structures for companies.
Finally, the detailed models and procedures will be made available in the restricted section of the RECUPERA website for Asset Recovery Units, and will be updated following the issuance of regulations by the Central Bank.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
