Bitcoin Is No Sanctuary From Justice, by Fransiscus Nanga Roka

Cryptocurrency offers the enticing allure of control without curators. Its violent perversion is prosperity without responsibility. Digital assets should not be the new go-to escape route to evade legitimate debts and Germany’s enforcement framework intends to challenge that fantasy. But effective enforcement is more than simply declaring Bitcoin attachable and far less draconian than threatening every uncooperative wallet owner with jailtime.

Legal precision matters. In case IX R 3/22, on February 14, 2023 the Federal Fiscal Court of Germany ruled that Bitcoin, Ether and Monero are recognized as economic assets for income-tax purposes. That ruling did not create a one size fits all civilian ownership regime, nor permit unlimited or unregulated seizure. Making identity in tax class (tax industry) hold the same meaning as property law creates certainty where not founded legal questions exist.

Let make it more specific, the civil enforcement foundation. Germany expanded the enforcement rules on proprietary rights to other types of proprietary right by virtue of Section 857 of the CC P. Importantly, it deals with non-existant third-party debtors: attachment can occur where an order has been served on the debtor preventing them from disposing of the asset. This provides a legal basis for accessing intangible wealth without falsely asserting that Bitcoin is tangible property.

The expectation of insolvency administrators and enforcement authorities is self-evident for creditors. The debtor that encodes a portion of recoverable wealth into tokens should not escape responsibility by virtue, or lack thereof, of technological sophistication. Other than that, the law artificially incentivizes secrecy while innocent creditors wear the exposure.

Custodial holdings provide a clear intermediary. In cases where a judgement debtor has an attachable right of action against an exchange, a draft order served in accordance with court rules can be used to restrain payment to that same debtor. The cornerstone of monetised claims is provided for in Section 829. However, ensuring that the right legal entity is identified, establishing jurisdiction and determining what contractual rights accruing directly to the customer are core issues. A exchange account is not just a different branded bank account.

Self custody reveals the more difficult problem: legal ownership does not imply technical access. An order may prevent transfers, but it cannot reconstruct a truly missing private key.

Section 888 of the German Civil Code allows for punitive fines or imprisonment for specific obligations which hinge solely on the willpower of the debtor. That condition matters. This is not a carte blanche on incarcerating every single person that doesn’t give you a seed phrase. Before applying coercion, courts need to be able to discern the imposition of a duty on a party that is non-compliant from one that must simply chooseto comply with it. Second, civil enforcement must also stay separate from criminal confiscation and its associated procedural safeguards.

The MiCA framework provides much-needed regulation on the market side of things within Europe but is not a clear one-size-fits-all ticket to circumvent national enforcement processes. Its broad applicability commenced on 30 December 2024; it should not be presented as an over-fresh power to raid every European wallet.

The path is clear: now, governments must follow it with four strategic reforms.

Books with attachments, claims against custodians in relation to self-custodied assets including ownership disputes and interests of third parties.

Second, secure judicial custody: custody rights, independent reviews, access and valuation records. A sloppily triggered seizure can easily turn into yet another loss of assets event.

Third, introduce reliable proof of the link between a debtor to the pertinent assets. Blockchain tracing should aid judicial assessment, but not substitute it.

Fourth, decentralise coercion and render it scrutiniseable. That, then, should guide the orders towards recoverable assets, by sheltering unconnected interests and an actual inability to comply.

While cryptography should never serve as the private domain of debtors. Apr 2024 If creditor protection is not to be turned into a get-outofthe-way-free card for unlimited access by the state.

The real challenge is whether courts will be able to trace the digital riches accurately, safely and legally. It preserves concealment, a system that recognizes assets but cannot access them. A great equalizer becomes a threat to justice itself when it goes indiscrimination at everything.

Fransiscus Nanga Roka

Faculty of Law University 17 August 1945 Surabaya and Managing Partner Law Firm Victorious Indonesia