Written by: Emma Madden-Torpey, PNLD Legal Adviser
Not reviewed after the date of publication - 25 June 2025
The introduction of cryptoassets into our ever-changing society meant that criminal networks have been able to exploit the technology in order to assist in evading law enforcement, as high value digital assets were difficult to track and trace.
Digital assets have been used to conceal proceeds of crimes, finance terrorism, to evade government-imposed sanctions or in large-scale scams to defraud. In this article PNLD Legal Adviser Emma Madden-Torpey, highlights and discusses the issues that have arisen in this area, the current law as it stands and the statutory measures that are being proposed to tackle the growing problems relating to cryptoassets.
Background
There are currently thousands of types of cryptoassets used around the world, these include cryptocurrency, utility tokens, security tokens, stable coins, non-fungible tokens, governance tokens. Some of the most well-known cryptoassets are Bitcoin, Litecoin, Etherum, Dogecoin and CryptoKitties.
Cryptoassets are usually created by a process of mining to form a digital asset that is distributed on a blockchain (digital ledger technology (DLT)), although they can be created in many different ways dependent on the type of cryptoasset. They can then be accessed via different means, although this is mainly via a specified code (known as the key). Cryptoassets can differ slightly in terms of creation, ability and operation. They can be exchanged, traded or stored electronically and their value is based on different factors such as the scarcity, security of the asset and financial freedom it provides compared to traditional means. However these factors also influence their fluctuations in value.
Within the United Kingdom it is legal to mine, mint, create, own or transfer cryptoassets. Unlike traditional currencies and banks which provide protection for consumers, the area of digital assets is widely unregulated (apart from security tokens and e-money tokens) and therefore open to abuse and exploitation.
The use of cryptoassets by criminal networks
Digital assets appeal to criminal networks due to their pseudo-anonymity, untraceable nature (when used on private blockchains or a mixer/tumbler has been used to obfuscate the source) and their capability for fast cross-border transactions. Investigators are to be aware and knowledgeable of the current uses of cryptoassets within these networks in order to aid investigations and crack down on exploitation of the digital market. The National Crime Agency’s (NCA) National Assessment Centre estimates that likely over £1 billion of illicit cash is transferred overseas using cryptoassets.
In December 2024, the NCA disrupted a multi-billion-dollar Russian money laundering network which were supporting serious and organised crime around the world, including on the streets of the United Kingdom. The operation, Operation Destabilise, was an international operation which exposed a money-laundering criminal network used by, amongst others, transnational drug traffickers, cybercriminals and Russian nationals evading sanctions. Many arrests took place which uncovered a complex scheme where networks collected funds in one country and made the equivalent value available in another, normally exchanging cryptocurrency for fiat currency (government issued money which is not backed by a physical asset like gold or silver).
In January 2025 the CPS ordered three convicted money launderers, who were illegally obtaining Australian dollars and laundering them through cryptocurrency, to repay £23,629,031. The three convicted exploited a loophole on a trading platform and illegally obtained and withdrew credits worth more than 20 million pounds.
Cryptoasset investors promise high returns exceeding normal market trends, this is due to the high-risk nature of investing in cryptoassets with the unknown market fluctuations that are difficult to predict and the general lack of knowledge surrounding cryptoassets, meaning they are easy to exploit. In 2024, 649 million pounds were lost in investment fraud within the UK alone, 66% of all those reported featured cryptocurrency.
The current legal landscape within the UK
When cryptoassets first came to the attention of government, it was questioned as to whether buying and selling cryptoassets would be defined as a form of gambling due to their unpredictable and volatile nature. This would lead them to being governed under the Gambling Commission as advised by the House of Commons Treasury Committee in their proposal in 2023. The government were concerned that regulating cryptoassets under retail or investment activity would create a ‘halo’ effect, effectively suggesting to consumers that investing and using crypto was safe due to being regulated. Although cryptoassets are volatile and can be a high-risk investment, this action has been dubbed to be ‘crypto-sceptical’.
The Courts’ approach
The question of cryptoassets being personal property in law in the UK has come under the scrutiny of the courts in recent years. Traditionally on the question of property, the courts followed the case of Colonial Bank v Whinney (1886) 11 App Cas 426, which provided authority that the two existing categories of personal property, choses in possession and choses in action, are exhaustive. This stance in common law misaligned with the new and growing market of digital assets.
However, AA v Persons Unknown (2020) looked to change this stance and confirmed that cryptoassets such as Bitcoin can be defined as property within the UK: they were definable, identifiable and they had some degree of permanence. This was the starting point for cryptoassets being defined as property within the UK legal framework. Changes are proposed to be made to ensure that the common law is confirmed in statute.
Current Regulation
Certain cryptocurrencies are regulated under the Financial Conduct Authority (FCA) with many more to hopefully follow suit. In 2020 the FCA introduced an anti-money laundering and counter-terrorist financing (AML/CTF) regime which requires cryptoasset businesses to be registered. This puts a duty on business owners to ‘take appropriate steps to identify and assess the risks of money laundering, proliferation financing and terrorist financing which the business is subject to’. However, this duty applies only to business owners and should the use of cryptoassets fall outside of this regulation, they continue to be exploited by criminal networks.
Current Legislation
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) amended the Proceeds of Crime Act 2002 (POCA) from 26th April 2024 which opened up legislative powers for officers to seize and recover cryptoassets found to be linked to criminal, and potentially terrorist, activity and financing. Police no longer needed to arrest a suspect in order to seize cryptoassets which assists in investigations where funds have been transferred illegally and where suspects may be overseas. The Code of Practice Issued under section 303Z25 of the Proceeds of Crime Act 2002: Recovery of Cryptoassets and Related Items - Search Powers supplements the legislation in assisting officers with the execution of powers.
Proposed changes to regulation and legislation
Although cryptoassets have been defined within the legal framework of the UK to an extent, further regulation and legislation has been proposed in order to tighten and control the uses of cryptoassets by businesses and to reduce their use in criminality as the existing framework does not extend far enough. As digital markets continue to develop and cryptoassets become more engrained in daily and business life, their status within the UK law continues to be discussed and steps are being taken to define such status.
It seems that the UK have now taken the approach of financial regulation to align with international standards. The House of Commons Treasury Committee’s Seventh Special Report states: ‘The Committee’s proposed approach [in the original proposal cited above] would therefore risk creating misalignment with international standards and approaches from other major jurisdictions including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission’.
Law Commission’s recommendations
The UK Government announced a task force in response to digital currencies in 2018 including HM Treasury, the Financial Conduct Authority and the Bank of England who published a report later that year. Following this the Law Commission published a final report in 2023 which included 4 recommendations to the government relating to digital assets. The recommendations were:
- Confirm the current common law position of personal property rights for digital assets by writing it into statute.
- Develop a new regime for collateral arrangements involving crypto-tokens and cryptoassets.
- Create/nominate a panel of industry-specific technical experts, legal practitioners, academics and judges to provide non-binding guidance on the complex and developing factual and legal issues relating to control involving third category property (such as digital assets).
- Statutory amendment to FCARs (Financial Collateral Arrangements (No 2) Regulations 2003). In particular, that laws applicable to UK companies should be reviewed to assess the merits of reforms that would confirm the validity of and/or expand the use of crypto-token networks for the issuance and transfer of equity and other registered corporate securities.
Proposed legislation
On the back of the above reports and recommendations, Parliament have introduced two bills to the Houses; The Property (Digital Assets Etc.) Bill and the draft statutory instrument for the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025. Please also see the policy note for the draft statutory instrument.
The Property (Digital Assets Etc.) Bill intends to confirm digital assets are able to be recognised as property even though it does not fit into the traditional existing categories. The government expect, ‘The new law will therefore also give legal protection to owners and companies against fraud and scams, while helping judges deal with complex cases where digital holdings are disputed or form part of settlements, for example in divorce cases.’
The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 proposes regulation of cryptoassets by the FCA, requiring firms wishing to provide associated services in or to the UK to be authorised and supervised by the FCA. The new bill proposes to create new regulated activities and amend existing anti-money laundering and financial promotions legislation. Supporting these new regulated activities would include further admissions and disclosures, and market abuse frameworks. Closer monitoring, should help protect customers from investment fraud by illegitimate crypto firms and scams. However, stablecoins (cryptocurrency that mentions a fiat currency) are not included in the new proposals. This is not to say that they cannot be used within the UK, they will merely continue to be unregulated. This may present an issue in the future should the UK decide to implement a digital pound (see the Bank of England consultation here). However, the government have stated that they are willing to respond to this matter as the area develops.
Impact for policing
The new proposed bills outlined are expected to create fuller and closer regulation for digital assets within the UK, which would actively respond to the ever-changing technology in a more timely manner. It is expected that the legislation and regulation of cryptoassets will crack down on illegitimate crypto firms and reduce their exploitation for illicit uses within criminal networks and organisations. Regulating cryptoassets and bringing them in line with traditional and fiat currencies will open up the transparency of the area and protect consumers from scams. Rachel Reeves, UK Chancellor of the Exchequer stated, ‘robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK.’
Although there are no new policing powers proposed to be brought into legislation via the new bills, policing should see more of an awareness within the courts and understanding by the public on the legal standing of digital assets. The legal stance as property in legislation and increased regulation should assist in investigating crimes and criminal networks that exploit the digital asset market.
A Final Word
Though the bills are currently going through the Houses of Parliament and amendments may be made to them following debates surrounding the issues and proposed legislation, the new bills are pushing the UK’s legal stance on digital assets in the right direction. The legislation has purposefully not created a new category of property under the Property (Digital Assets etc) Bill, in order to balance risks posed by cryptoassets whilst not imposing unnecessary restrictions that may impede innovation. It is hard to tell whether the intended impact of the proposed legislation will be felt across the UK, however we remain hopeful that giving digital assets/cryptoassets a sound legal standing and heightened regulation for the area, will reduce the current exploitation within the area by criminal networks. The impact on policing and the hopeful reduction of the abuse of cryptoassets will not be determined until the legislation receives royal assent and the Act’s come into force.
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