Cryptocurrency: What You Need To Know – Maria Karaiskos KC and Charlie Hutchins
Maria Karaiskos KC and Charlie Hutchins introduce the fundamentals of cryptocurrency and crypto assets and examine how crypto operates in practice, the developing UK regulatory framework, and the expanding powers around crypto assets under POCA.
Introduction: crypto-what?
Crypto currency. Crypto assets. Crypto wallets. Crypto asset-related items. It’s all Greek to us!
Welcome to the word of digital currency.
The word ‘crypto’ originates from the Greek word ‘kryptos’ – meaning ‘hidden’ or ‘secret’. Cryptocurrency is a digital form of payment, using encrypted, or ‘hidden’ algorithms.
In simple terms, it is currency which only exists electronically. It is not tangible currency, like cash or gold. Cryptocurrency cannot usually be taken out of the bank or exchanged for goods and services in the way cash can. Monzo however, allows you to exchange your crypto assets and take them out as cash. Cryptos are developed and run by groups, individuals or companies. No bank is needed in the world of cryptocurrency.
In technical terms, a ‘crypto asset’ is a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology (‘DLT’). It can be transferred, stored or traded electronically, but you would not usually buy things with it on your local high street. There are bars (Brewdog) and shops (Jura watches) where you can pay with cryptocurrency, although very few organisations facilitate this sort of transaction. Cryptocurrency is accepted by certain IT and travel companies, for instance, Norwegian Air, Alternative Airlines and some of the Radisson Hotel group in Dubai, and it is anticipated that in the future its use will become more widespread as a means of payment.
A ‘crypto wallet’ is software, hardware, a physical item, or any combination of these that is used to store the cryptographic private key that allows crypto assets to be accessed.
Cryptocurrencies are stored in crypto wallets which can be hot wallets or cold wallets. A hot wallet works online, like an app on a device. A cold wallet is stored offline for greater security and can include physical devices, also known as hardware wallets.
Crypto assets in the market
There are over 20,000 types of crypto assets out there, with the FCA believing some 12% of the UK adult population owns crypto assets. Some familiar examples include Bitcoins, Ripple, Tether, Litecoin and Ethereum.
- Bitcoin (or ‘BTC’) was created in 2009 and is the original and longest-running crypto.
- Ethereum (or ‘ETH’) differs from Bitcoin as it runs on a programme, or computer code.
- Tether (or ‘USDT’) is a type of crypto called a ‘stablecoin’, meaning that its value is linked to stable assets, like the US $ or gold.
Cryptocurrency is inherently volatile and can increase or decrease in value very frequently and rapidly, even daily. Investing in cryptocurrency is therefore high risk and inherently speculative. It is also largely but not completely, unregulated in the UK. And so, compensation would not follow via the Financial Services Compensation Scheme (FSCS). Most crypto assets are not specified investments under the Financial Services and Markets Act 2000 (FSMA) and so it is unlikely that customers will have access to the Financial Ombudsman or the FSCS https://www.fca.org.uk/firms/financial-crime/cryptoassets-aml-ctf-regime.
The Financial Conduct Authority (‘FCA’), warns that crypto assets are high-risk and ‘if something goes wrong, you’re unlikely to have access to financial compensation.’ The FCA does, however, subject crypto asset businesses to the money laundering regulations and it is currently developing a regulatory regime to provide greater protection to customers and investors.
Despite its high risk, however cryptocurrency plays an important role in investment, virtual innovation and digital finance.
Crypto regulation
It is fair to say governments across the world are playing catch-up from a legislative perspective in an effort to get to grips with this rapidly expanding new financial area. The Crypto asset Reporting Framework (‘CARF’) was set-up to enable cross-border information exchanges between tax authorities on the transactions of users of crypto assets.
From 1 January 2026, CARF requires UK Reporting Crypto asset Service Providers (‘RCASPs’) to collect tax relevant information and undertake due diligence in relation to their users on an annual basis. Information on non-UK users will be exchanged with other tax jurisdictions who have also implemented the CARF. In return, HMRC will receive data collected from other jurisdictions to help it tackle tax evasion and avoidance.
The tax treatment of crypto assets can be complex. However, in simple terms HMRC sees the profit or loss made on buying and selling of exchange tokens as within the charge to Capital Gains Tax (CGT). A disposal of a crypto asset occurs when you sell it for fiat currency, trade it for another crypto asset, spend it or gift it to someone other than a spouse or civil partner. HMRC’s guidance says that only in exceptional circumstances will it accept that buying and selling of crypto amounts to a trade for tax purposes.
For individuals, this means that if you have sold crypto for a profit during the 2024-25 tax year, you may have reporting and tax obligations and be required to file a tax return before 31 January 2026.
For the first time this year, the Self-Assessment tax return form has a dedicated section where taxpayers can declare their crypto gains and losses.
Crypto confiscations
In the UK, the powers to seize, detain and forfeit cryptocurrency and crypto assets are set out mainly in the Proceeds of Crime Act 2002 (‘POCA’) as amended by the Economic Crime and Corporate Transparency Act 2023, which created a dedicated crypto regime. These powers allow police, the National Crime Agency, HMRC and other enforcement bodies to take control of crypto assets suspected of being criminal property or intended for unlawful use.
Seizure
General powers – authorities have powers to search and seize realisable property under POCA 2002, s.47C where there are reasonable grounds to suspect that the property may otherwise be made unavailable for the purposes of satisfying any confiscation order that has been or may be made against a defendant in criminal proceedings.
The power to seize property on this basis is available only if one of the several sets of conditions set out in POCA 2002, s 47B applies. To summarise, typically, although there are other conditions, any of the following conditions would need to apply for the officer to proceed:
- A criminal investigation has been started in England and Wales with regard to an indicatable offence;
- Proceedings for the offence have not yet been started against the person in England and Wales;
- There is reasonable cause to believe that the defendant has benefited from conduct constituting the offence;
- A restraint order is not in force in respect of any realisable property.
The definition of a crypto asset-related item for these purposes is set out in POCA 2002, s 47C(5B), namely it is an item of property that is, or that contains or gives access to information that is, likely to assist in the seizure of any crypto assets.
The power to seize is limited to that which is realisable property and not otherwise exempt. Realisable property has a very distinct meaning within the terms of POCA 2002 and may extend to property owned by someone other than the defendant where the defendant has a realisable interest in it.
Crucially, however there are properties under the POCA regime which are exempt from seizure, such as those required for basic necessities, gainful study or employment. The first challenge therefore of any applicant will be proving that the crypto asset-related item is both realisable and not exempt.
If the item is exempt, there is a limited power to detain it for 48 hours, providing it is reasonably suspected to be a crypto asset-related item, and a senior officer has given their approval for this. Following this, an application may be made to authorise further detention pending the making or variation of a Restraint Order. In these circumstances the item may be detained until the application is determined or otherwise disposed of.
The exercise of these search and seizure powers requires the prior approval of a Magistrate or senior officer (unless otherwise impracticable).
The procedure is set out under Criminal Procedure Rules 2025, SI 2025/909 (‘CrimPR 2025’), r 33.26 and is the same as for other forms of free property considered to be at risk for the purposes of a future confiscation order.
Once a crypto asset-related item has been seized under POCA 2002, s 47C(5A), the appropriate officer may use any information obtained from it for the single purpose of enabling or facilitating the seizure under POCA 2002, s 47C(1) of any crypto assets by identifying or gaining access to a crypto wallet. Officers may seize crypto assets by transferring into a crypto wallet controlled by the appropriate officer.
Investigators may seize crypto assets directly (for example by taking control of a wallet or private key) where they have reasonable grounds to suspect the asset is the proceeds of crime. In theory, under Schedule 8 (Criminal) and Schedule 9 (Civil) of the Economic Crime and Corporate Transparency Act 2023 (‘ECCTA 2023’) authorities are now armed to tackle this relatively new medium of finance.
Detention
Once seized, crypto assets may be held for an initial 48 hours, after which officers must apply to the magistrates’ Court for a detention order under s.303Z5 POCA. The Court may grant detention for up to 6 months at a time, with a maximum of 2 years, unless criminal proceedings or forfeiture action begins. The Court must be satisfied that the assets are likely to be criminal property and that detention is necessary for ongoing investigations. Detention orders can be varied or discharged, and affected persons may apply for the return of property.
Forfeiture
If investigators conclude that the crypto assets are criminal property, they may apply to the magistrates’ Court for a forfeiture order under ss.303Z9–303Z14 POCA. The Court decides the issue on the civil standard (balance of probabilities). Once forfeited, the assets can be realised—often through conversion into conventional currency—and transferred into the Home Office Asset Recovery Fund or, in some cases used to compensate victims. For larger or more complex cases, the Crown Court may also order confiscation or restraint under the broader POCA confiscation regime.
Release of detained property
Where property is either seized or detained under POCA 2002, Pt 2, it must be released in circumstances where the conditions for seizure/detention are no longer met.
Thereafter, if a crypto asset-related item is not claimed within a year of release, it is subject to being effectively forfeited in favour of the Treasury or otherwise destroyed or disposed of, but only where reasonable steps have been taken to notify the person from whom it was seized ( or any other person who there are reasonable grounds to believe have an interest in the item) of its release.
Appeals
The time-period for the lodging of an appeal against a forfeiture decision is 30 days from the day that the court makes the order. If the appeal is upheld, it may order the release of the whole or part of the funds. If a forfeiture order is successfully appealed, and the crypto assets are released, any interest which accrued during the time that the assets were held by the enforcement officer must also be returned to the person from whom they were seized, or the person by or for whom the crypto wallet was administered immediately before the freezing order was made.
Crypto-fraud: a recent case study
Zhimin Qian, also known as Yadi Zhang and dubbed the Chinese “crypto-queen” , defrauded more than 128,000 investors through a supposed health-tech and Bitcoin-mining company in China between 2014 and 2017. She then fled to the UK on a false passport. In London she maintained an opulent lifestyle, renting an expensive property in Hampstead, travelling across Europe, and using accomplices to convert and disguise enormous amounts of cryptocurrency. When police raided her Hampstead home in 2018, they seized devices containing around 61,000 Bitcoin – one of the largest crypto seizures in UK history, though her true identity was still unknown at the time.
Qian was finally arrested in York in 2024 and later pleaded guilty at Southwark Crown Court to possessing and transferring criminal property. In November 2025 she was sentenced to just under 12 years in prison, with the Judge describing her as the architect of a greed-driven scheme. Her accomplice, Seng Hok Ling also received a prison sentence for money laundering. The UK is now pursuing civil recovery action to ensure the seized cryptocurrency can eventually be used to compensate victims of the multibillion-pound fraud.
Maria Karaiskos KC
Charlie Hutchins
Barristers at Church Court Chambers – A set with substantial experience encompassing the full spectrum of business crime, POCA related applications, fraud and financial regulation.
Bibliography:
- Government Circulars 004/2024 and 005/2024
- Bank of England, https://www.bankofengland.co.uk/explainers/what-are-cryptocurrencies
- FCA, https://www.fca.org.uk/firms/financial-crime/cryptoassets-aml-ctf-regime
- POCA, https://www.legislation.gov.uk/ukpga/2002/29/contents
- HMRC, https://www.gov.uk/government/publications/cryptoasset-reporting-framework-reporting-of-uk-resident-cryptoasset-users/domestic-reporting-of-uk-resident-cryptoasset-users-under-the-cryptoasset-reporting-framework#:~:text=Proposed%20revisions,Treasury%20to%20maintain%20this%20legislation.
- ifamagazine.com
