International Experience in Tracing Digital Assets (on the Example of Europe)

In recent years, the European Union has adopted important regulatory acts concerning the crypto-assets market.

The MiCA (Markets in Crypto-Assets) Regulation, adopted in 2023, establishes a framework for licensing crypto exchanges and supervising them. While MiCA mainly focuses on investor protection and market transparency, it will indirectly help in tracing debtors’ assets – since EU-licensed exchanges will be obliged to retain user data, comply with financial monitoring requirements, and cooperate with judicial authorities.

In addition, the updated EU Anti-Money Laundering Directives (AMLD5/6) include cryptocurrency transactions as part of financial monitoring. Already, most EU countries require crypto companies to implement the Travel Rule – a rule under which information about the sender and recipient of a transaction must accompany the payment. This means anonymity is reduced, and if a debtor transfers funds to an exchange or withdraws them into fiat, a trace remains.

When it comes to enforcement of judgments, EU countries rely on their national law, but actively consider court precedents. There are already examples where courts directly authorized the confiscation of cryptocurrencies. For example, in 2021, a German court ordered the seizure of bitcoins from a defendant and their transfer to the state budget. Interestingly, the value of the confiscated coins at the time of sale significantly exceeded the damages due to the rise in exchange rates, and the court had to decide what to do with the “surplus.”

In Sweden, a similar situation occurred when selling confiscated coins: the state received more funds than required to repay creditors and had to return the excess to the debtor. These cases encouraged European authorities to develop guidelines for addressing volatility – in particular, recommending that seized crypto assets be sold as quickly as possible to fix their value and satisfy the judgment.

English law has proven extremely flexible and effective in relation to crypto assets. Judges in London have already developed mechanisms considered exemplary. One of the most powerful tools is the Worldwide Freezing Order (WFO), which globally freezes a debtor’s assets.

The High Court of England can issue such an order, which formally prohibits the defendant from disposing of their assets anywhere in the world. In practice, this means that if a debtor’s cryptocurrency is known, the court will oblige them not to transfer or hide the coins. Breach of the order entails criminal liability for contempt of court.

WFOs are effective when the debtor has assets in jurisdictions that recognize English court decisions, or when the debtor fears the consequences. According to experts, the Worldwide Freezing Order is currently one of the most effective tools for recovering crypto assets abroad.

The typical algorithm of actions in London is as follows:

1. Quickly identify on which exchanges or wallets the assets are located (with the help of specialized agencies).
2. File a claim in an English court.
3. Obtain an urgent freezing order and send it to the relevant exchanges.

This process takes from one week to one month – quite fast, considering the international scale. After that, the case is considered on its merits, and if the claimant proves the debt, the court will order recovery, with the already frozen assets going toward enforcement.

Importantly, English courts can not only block crypto assets on exchange accounts but also transfer them under the control of a trustee (such as an interim administrator).

In the case AA v Person Unknown (2019), the judge allowed the appointment of an administrator who transferred the stolen bitcoins to a specially created controlled wallet, ensuring their preservation until the end of the process.

The British judicial system also stood out by allowing court documents to be served to defendants via NFT: in Lavinia Osbourne v Persons Unknown (2022), the High Court permitted serving an order directly to blockchain addresses where the disputed NFTs were stored, effectively “attaching” the notice to the token. This was the first such case worldwide and confirmed that NFTs in England are recognized as property capable of being the subject of litigation and injunctive measures.

The problem that remains even with WFOs or similar tools is determining where exactly to apply the order. Most crypto exchanges are registered in multiple countries: for example, the main legal entity may be in Cyprus, a branch in the US, a license in Lithuania, and servers in Singapore.

Thus, identifying the jurisdiction where the debtor’s coins “reside” is not always straightforward. British lawyers recommend choosing the jurisdiction where the exchange has the most significant presence and where court decisions can be effectively enforced. In some cases, parallel proceedings in several countries may be required.

For example, if an English court freezes assets but the exchange is physically located in the British Virgin Islands, a separate order there may be necessary. This complicates the process and increases costs, but experience shows that for large sums, the effort is worthwhile. When millions are at stake, creditors are ready to spend tens of thousands on London lawyers – and often achieve positive results, since English law already has developed practice and relatively fast procedures.

Other European Countries

In continental Europe, there is no single “crypto enforcer,” but separate initiatives are emerging.

• In Switzerland, judicial authorities have long recognized cryptocurrency as an asset in bankruptcy proceedings – liquidators can access a bankrupt’s wallets and sell the coins, as in the 2014 bankruptcy of the Tradehill exchange.
• In the Netherlands, special police units have been created to track crypto assets, and their expertise is being adopted by bailiffs.
• Germany plans to amend the civil procedure code to include rules on digital proof of ownership, simplifying the demonstration in court that a debtor possesses cryptocurrency (e.g., if their wallet is found).

These steps are still fragmented but clearly indicate the direction: integrating crypto assets into the existing legal system as a legitimate object of enforcement.