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Cryptocurrency investigations

If you are being investigated or prosecuted relating to use of cryptocurrency or your companies use of, including Bitcoin, the specialist team of solicitors at Olliers can provide you with the expert legal advice and representation that you require,

Our business crime lawyers are well versed on the risks associated with cryptocurrencies and, as such, are well placed to help you deal with external investigations carried out by the Crown Prosecution Service (CPS), HM Revenue and Customs (HMRC) and the Financial Conduct Authority (FCA) and, seek to avoid prosecution.

How can Olliers help you?

  • Investigations by any enforcement agency including the FCA, HMRC and the SFO
  • Representation and attendance at Dawn Raids and execution of a search warrant
  • Advice on challenging the basis and legality of a search warrant
  • Liaising and negotiating with the enforcement agency on your behalf
  • Representation at voluntary PACE interviews or any formal meetings with enforcement agencies
  • Representation in any ensuing criminal proceedings such as a prosecution for serious fraud, money laundering or regulatory breaches.

What is Cryptocurrency?

In simple terms, a cryptocurrency is a digital currency that makes use of cryptography to ensure transactions are secure. In addition to operating as a medium of exchange, some users view the purchase of cryptocurrencies as an investment, and numerous exchanges have been set up to facilitate the trade in such digital assets, for example, Coinbase.

Cryptocurrency transactions are underpinned by blockchain technology, which creates a permanent and unalterable online ledger of every transaction made using the currency. Bitcoin is the first and most widely used cryptocurrency, and it is in fact possible to view every Bitcoin transaction that has taken place since its launch in 2009.

Increasing numbers of reputable businesses of all sizes are now using cryptocurrencies as part of their day-to-day trading activities, ranging from global companies like Microsoft to art galleries in London.

In 2017, Dadiani Fine Art became the first gallery in the UK to accept payment in Bitcoin and other cryptocurrencies, with the hope that such an approach would make the art market accessible to a wider variety of customers.

In October 2020 PayPal announced that it was entering the cryptocurrency market indicating that its customers will be able to buy and sell Bitcoin and other digital currencies using their PayPal accounts. Other payment firms, such as Square’s Cash app and Revolut, have already offered cryptocurrencies for sale. However, PayPal has one of the largest merchant networks in the world. Prices rose alongside the news, breaking the $12,000 (£9,170) mark.

Criminal use of cryptocurrencies

As cryptocurrencies are pseudonymous – meaning that transactions and accounts are not easily connected to real-world identities – it means they are often used for illegal activities such as money laundering and tax evasion. Furthermore the lack of regulation of the multi-billion dollars crypto assets market has led to concerns that such digital currencies are favoured by criminal networks to conduct their business.

Cryptocurrencies are inherent to the Dark Web, a network of hidden websites from which prohibited goods and services can be purchased. The most famous of these websites was the Silk Road, which facilitated an estimated £131 million worth of illegal drug sales before being shut down in 2013.

In 2017, the high-profile WannaCry ransomware cyber attack that affected people in over 150 countries featured a demand for payment in Bitcoin, while Bitcoin was also the ransom of choice later in 2017 when hackers blackmailed the HBO network after a major cyber attack.

Money Laundering

In January 2020, the EU’s Fifth Money Laundering Directive came into force in an effort to tackle the increasing levels of worldwide money laundering, terrorist financing and corruption.

It is widely acknowledged that the rise in cryptocurrencies has significantly contributed to this problem. As a result, the Fifth Money Laundering Directive has focused on bringing changes to the cryptocurrency sector to bring it into line with the traditional financial and professional services sectors.

Financial Conduct Authority (FCA)

The UK Cryptoassets Taskforce, consisting of the Treasury, the FCA and the Bank of England, published a Final Report in October 2018 setting out the UK’s policy and regulatory approach to cryptoassets and made a number of commitments. This included a commitment to consult on a potential ban on the sale to retail consumers of derivatives that reference certain types of cryptoassets.

In October 2020, the FCA published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers. The ban will come into effect on 6 January 2021.

Initial Coin Offerings (ICOs)

In much the same way that an IPO (Initial Public Offering) involves the issue of shares to investors in exchange for fiat currency, an ICO (Initial Coin Offering) involves the issue of transferable tokens to investors typically in exchange for cryptocurrency such as Bitcoin or ethereum. Some tokens may resemble traditional securities such as shares  while others may represent a right to access or receive future services. The earliest ICOs were used to launch new cryptocurrencies but increasingly they have been used by start-up companies to fund the development of new projects and, in particular, the development of decentralised software applications that run on existing blockchain platforms, such as Ethereum.

The volatility of cryptocurrency has led to many investments in the cryptosphere becoming worthless and this combined with the perceived lack of regulation in the marketplace had led to many ICOs’ being investigated.

HMRC’s Approach to Cryptocurrencies

Although the corporation tax, income tax and capital gains tax treatment of activities involving cryptocurrencies will depend on the specifics of the activities involved, HMRC has made it clear that the use of cryptocurrencies is not a way to avoid paying the tax that would ordinarily be due if the transactions in question had taken place in fiat currency. For example, in cases where businesses accept payment for goods or services in cryptocurrencies, there is no change to what constitutes revenue or how taxable profits are calculated. Equally, VAT must be dealt with in the normal way by suppliers of goods or services provided in exchange for digital currency.

Cryptocurrencies facilitate the fast and effective flow of funds, are expected to have a major impact on global business. However, as their popularity grows, so does the risk of money laundering and the potential for failing to adhere to HMRC’s tax regulations and the FCA’s financial regulations.

Contact Olliers Solicitors

Our specialist criminal defence solicitors can provide advice and consultancy to businesses who are concerned about ensuring they are compliant with any current or upcoming regulations around cryptocurrency.

In addition, if your business is under investigation for its use of cryptocurrencies, we can provide you with the legal advice and representation you need to avoid prosecution.

Types of cases we can represent you in relation to:

  • Allegations of money laundering involving cryptocurrency
  • Investigations as a result of  lack of ‘Know Your Client’ (KYC) and ‘Due Diligence’ checks
  • Investigations as a result of worthless/fictitious ‘Initial Coin Offerings (‘ICOs’)
  • Defending allegations of theft of cryptocurrencies from personal wallets/exchange providers

Contact Ruth Peters or Matthew Claughton for a no obligation confidential discussion.


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