Crypto Asset Protection: Seizure and Proof of Ownership

Cryptocurrency is increasingly becoming the subject of financial investigations, asset freezes, and potential confiscation. For digital asset holders, the primary risk lies not only in the traceability of transactions but also in the possibility that technical connections between wallets may be used to draw conclusions about the ownership of assets by a particular person.

However, tracing the movement of funds, identifying a cryptocurrency exchange user, and proving legal ownership of an asset are distinct legal tasks. Treating them as interchangeable creates a risk of unjustified interference with property rights.

Blockchain Confirms Transactions, but Not Necessarily Ownership

A public blockchain makes it possible to identify the sender's and recipient's addresses, the time of a transaction, its amount, and the subsequent movement of assets. Specialized analytical systems help cluster addresses and identify potential connections with exchanges, cryptocurrency exchange services, and other market participants.

However, even reliably established cryptocurrency transactions do not always make it possible to determine the legal owner of the assets. An address may be used to conduct transactions on behalf of another person, make corporate payments, or hold client assets. Access to a wallet does not necessarily establish that all assets held in it belong to the person conducting the transactions.

Accordingly, determining the beneficial ownership of cryptocurrency requires a combination of evidence rather than relying solely on automated transaction analysis.

Cryptocurrency Freezes Have Already Become Part of Judicial Practice

A relevant example is the ruling of the Shevchenkivskyi District Court of Kyiv dated 8 April 2026 in case No. 761/13049/26.

In criminal proceedings, the court ordered the freezing of virtual assets held through the Binance exchange in a specified account and cryptocurrency wallets.

This ruling demonstrates that restrictive measures can be applied to digital assets in practice. At the same time, it does not eliminate the need to establish the legal grounds for restricting property rights in each individual proceeding. Article 170 of the Criminal Procedure Code of Ukraine provides for several purposes of asset seizure, including the preservation of physical evidence, securing special confiscation, confiscation of property, and securing civil claims. Each of these grounds is subject to its own legal requirements.

Therefore, merely referring to criminal proceedings or to a connection between a cryptocurrency wallet and a suspect is insufficient without proper justification of the specific legal grounds for the seizure.

What the Defence Must Establish

In disputes concerning the seizure of crypto assets, the defence must distinguish between the technical identification of a wallet, actual control over the assets, and their legal ownership. Relevant evidence may include cryptocurrency purchase records, exchange transaction histories, documentation confirming the source of funds, contracts, corporate documents, accounting records, and other materials establishing the economic substance of transactions.

This becomes particularly important when the seizure affects property belonging to a third party who does not have the procedural status of a suspect. In such circumstances, it is necessary to examine not only the connection between the asset and the subject matter of the investigation but also whether the restriction imposed is consistent with the specific purpose of the seizure.

Furthermore, under Articles 173 and 174 of the Criminal Procedure Code of Ukraine, the reasonableness and proportionality of restrictions on property rights are essential considerations, as is the possibility of lifting the seizure if the need for it no longer exists or if it was imposed without sufficient justification.

Asset Protection Begins Before Criminal Proceedings

One of the greatest practical challenges is retrospectively establishing cryptocurrency ownership when assets have already been frozen and documentation relating to their acquisition or transfer is unavailable.

Protecting digital capital therefore requires advance documentation of the source of funds, the legal grounds for acquiring assets, transactions between personal and corporate wallets, and the separation of company property from assets belonging to its beneficial owners and third parties.

For businesses, a cryptocurrency wallet should not remain an instrument whose existence and use are documented exclusively through technical records. Its use should be integrated into corporate accounting and systems for documenting property rights.

Therefore, effective protection of crypto assets does not involve concealing transactions. It requires the ability to legally establish who owns the assets, the grounds on which they were acquired, and why their seizure is unjustified or disproportionate.