Bitcoin and Criminal Confiscation

If law enforcement authorities discover Bitcoin holdings of a defendant during investigations, the court may order forfeiture if the offender unlawfully obtained the right to use the transferred Bitcoin value stored in a Bitcoin address.

1. Relevant Terms

Bitcoin Balance

A Bitcoin balance cannot simply be reduced to a fixed amount. Legally relevant are only the individual Bitcoin transactions not yet spent. These so-called unspent transaction outputs (UTXO) represent the transferred Bitcoin value in a Bitcoin address.

Wallet

A wallet serves as the storage location for UTXOs. It can combine several Bitcoin addresses, each secured by a public and private key.

Blockchain

The blockchain forms the backbone of this complex technology. It is a peer-to-peer network that cryptographically chains blocks of data. Miners validate these blocks, making the blockchain an immutable ledger of all transactions.

2. Bitcoin as an Object of Forfeiture

German forfeiture law, reformed in 2017, distinguishes between:

• Property obtained through or for the offence (§ 73 StGB).
• Objects produced by the offence (§ 74 StGB, so-called crime products).
• Means used or intended for the offence (§ 74 StGB).
• Objects to which the offence relates (§ 74 StGB).

In practice, Bitcoin is relevant mainly in the first two categories. For example:

• A perpetrator may be paid in Bitcoin for committing an offence – such payment can be forfeited under § 73 StGB.
• If drugs are sold in exchange for Bitcoin, the received Bitcoin constitutes criminal proceeds.

A debated issue arises with illegally mined Bitcoin. Are they to be treated as proceeds of crime (§ 73 StGB) or as products generated by the offence (§ 74 StGB)? The Federal Court of Justice (BGH) considered illegal mining via botnets (using hidden malware to exploit third-party computers) as falling under unlawful data manipulation (§ 303a StGB). Through this exploitation, Bitcoin was mined – raising questions about the exact legal classification.

3. Problems with Confiscation and Enforcement

• Directness of Asset Acquisition

The BGH decision on forfeiture under § 73 StGB faced some criticism. The creation of Bitcoin is technically not a direct consequence of illegal computing power use, but of the blockchain’s peer-to-peer process. Thus, the connection between illegal activity and asset inflow remains debated.

• Bitcoin as an Asset

Supporters see Bitcoin as a clear asset with real market value, while critics like Warren Buffet dismiss it as speculation. Nevertheless, its market value makes it subject to confiscation under German law.

• Enforcement Issues

Problems arise in enforcement:

• Transaction fees reduce the confiscated amount since fees must be deducted from the wallet’s UTXOs.
• Private key access is crucial. The BGH held that confiscation is possible even if the authorities do not know the key at the time of judgment. However, critics argue confiscation may be technically impossible if the key remains private.
• Execution of forfeiture: If authorities cannot access the private key, they cannot enforce a transfer to a government wallet. Unlike civil enforcement (§ 888 ZPO), no coercive detention or fines can be imposed to force disclosure.
• Issues of Preliminary Asset Freezing

If confiscation of Bitcoin is considered impossible, forfeiture of value applies (§ 73c StGB). During investigations, prosecutors may order preliminary asset arrest (§ 111e StPO) to secure enforcement.

However, compelling disclosure of a private key would violate the nemo tenetur principle – the constitutional right not to incriminate oneself. Forcing a defendant to reveal a wallet key would simultaneously prove ownership and involvement in the offence, conflicting with human dignity protections under German constitutional law.

4. Conclusion

Bitcoin challenges traditional criminal forfeiture law. While courts increasingly treat Bitcoin as a forfeitable asset, practical enforcement problems – especially the role of private keys – remain unresolved.

Defendants in cases involving white-collar crime, tax evasion or other financial offences should consult experienced criminal defence lawyers early to safeguard their rights.

FAQ – Bitcoin and Confiscation in German Criminal Law

Can Bitcoin be confiscated under German law?
Yes. If obtained through a crime, Bitcoin can be subject to forfeiture or value substitution.

What happens if authorities do not know the private key?
Courts may still order forfeiture. However, enforcement may fail without access to the key.

Are illegally mined Bitcoin treated as proceeds or products of crime?
This remains debated. German courts have applied both classifications depending on the circumstances.

What is value substitution (§ 73c StGB)?
If direct confiscation is impossible, authorities may order forfeiture of an equivalent monetary value.

Can disclosure of a private key be forced?
No. Forcing disclosure would violate the constitutional principle against self-incrimination (nemo tenetur).

Contact Our Criminal Defence Lawyers in Frankfurt

• Rechtsanwältin Dr. Caroline Jacob, Specialist Lawyer for Criminal Law
• Rechtsanwalt Frank M. Peter, Specialist Lawyer for Criminal Law
• Rechtsanwalt Dr. Sven Henseler, Diplom-Finanzwirt (FH)
• Of Counsel: Prof. Dr. Frank Peter Schuster
• Cooperation Partner: Tax Consultant and former Tax Investigator Frank Wehrheim

Our law firm Buchert Jacob Peter has been working in Frankfurt am Main for over 25 years with experienced criminal defence lawyers. We represent clients across Germany.

📞 Phone: +49 69 710 33 330
✉️ Email: kanzlei@dr-buchert.de

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