Why the UK authorities’ £1.4 million NFT seizure isn’t groundbreaking

Quick Take

  • The UK’s tax authority said this week that it had seized three NFTs and £5,000 worth of other crypto assets. 
  • Security experts say that while the processes are new, the practice of repossessing property to fight fraud has been around for decades. 

Cyber security officials poured cold water on the idea that a recent move to seize crypto assets in the UK, including three NFTs, had broken new ground. 

Earlier this week, the UK’s tax authority arrested three people on suspicion of attempting to defraud it of £1.4 million.

HM Revenue and Customs (HMRC) said the move to recover NFTs was a first, and part of a probe into a suspected Value Added Tax (VAT) fraud involving 250 alleged fake companies. VAT is a broad-based consumption tax assessed on the value added to goods and services. 

Assets can be recovered by authorities for a variety of reasons: to target money laundering, as a smoking gun in a criminal investigation, or as the suspected proceeds of fraud, to name a few.

The NFTs were seized alongside £5,000 worth of other crypto assets. Officials said that the seizure was a "warning to anyone who thinks they can use crypto assets to hide money."

Seizing NFTs is not as simple as a right-click and save-to-desktop. Government agencies around the world possess a range of custody solutions for storing digital assets, and some create their own storage if they don’t want to go through a third party. Others will use approved third-party custodians, like the ones outlined by the UK’s Financial Conduct Authority. 

Other techniques include the application of freezing orders on accounts holding digital goods – a measure that takes control of an existing wallet. It is akin to changing the locks on a house while wrongdoing is investigated at the property. Many criminals give away keys in return for more lenient sentencing. 

As this plays out, asset recovery specialists in the UK are less than impressed with the touted novelty of HMRC’s haul. While the processes are new, the practice of repossessing property to fight fraud has be