Authorities in Russia are pondering how to convert nearly $90 million worth of seized bitcoin (BTC) into revenue for the state coffers. The cryptocurrency has been confiscated as part of criminal proceedings against a former investigator convicted of corruption.

Officials say the case sets a precedent in the Russian Federation as it involves the forfeiture of a large amount of money in the form of digital coins. They have also urged the government to legally regulate the circulation of Bitcoin in the country for such purposes.

Bailiff’s office mulling over how to convert forfeited BTC into state revenue

Russia’s Federal Bailiff Service (FBS) is currently developing a mechanism to “turn bitcoin into income for the state,” its head revealed in a statement quoted by the Russian business news portal RBC. Dmitriy Aristov added that the agency is working with other interested institutions on the matter.

“Bitcoin is a problematic asset,” the FBS director noted during a meeting of the Committee on Constitutional Legislation and State Building at the Federation Council, the upper house of the Russian parliament. He was asked to comment on the current practice of cryptocurrency seizure in Russia.

Aristov pointed out that in the course of a criminal case against a corrupt official, judicial authorities have identified and confiscated a certain amount of BTC. Law enforcement agencies are now looking for a solution regarding its utilization, he explained.

“There is a precedent, a criminal case, in the course of which bitcoins were identified. Now we are developing a methodology for the implementation of this type of financial instruments with the relevant authorized bodies,” Aristov elaborated.

He was referring to the case of the former police investigator Marat Tambiev, who was convicted of taking a record bribe in cryptocurrency. The digital money was paid to him by members of the hacking group Infraud Organization to terminate their own criminal case and help them conceal funds.

Back in 2023, the Nikulinskiy District Court of Moscow decided to seize 1032.1 BTC stored in a hardware wallet found with Tambiev, the former head of the Investigative Department for Tver district, and ordered that the Bitcoin be “converted into income of Russia.”

At the time, the cryptocurrency was valued at 1.6 billion rubles (nearly $24 million) as per the court’s decision, which also sentenced Tambiev to 16 years in a prison colony and fined 500 million rubles. At current prices, the BTC would sell for close to $90 million.

Russia has yet to legalize and streamline cryptocurrency confiscation

The Federal Bailiff Service is a law enforcement agency subordinated to the Russian Ministry of Justice. Its main responsibilities include maintaining security and order within court facilities as well as ensuring proper and timely execution of judicial acts.

Under a dedicated law, Russian prosecutors are able to request the forfeiture of various types of property from persons holding public offices when their expenses do not match their earned income. These include land plots, other real estate, vehicles, shares, digital financial assets, and currencies like BTC.

Under a procedure referred to in legal texts as “conversion into the revenue of the Russian Federation”, they can also ask courts to order the appropriation of a monetary amount equivalent to the value of such property when its “conversion” into state income proves impossible.

Russian authorities have not yet found a solution to the challenges surrounding cryptocurrency confiscation; Aristov admitted and stressed that it’s necessary to legislatively regulate the turnover of digital assets in Russia for that purpose.

Last month, the Chairman of Russia’s Investigative Committee, Alexander Bastrykin, announced that a bill designed to recognize BTC and other cryptocurrencies as property within criminal law and proceedings has been sent to the government for consideration. It should determine the relevant procedure for crypto seizure.

Also in March, a member of the Russian Civic Chamber, Evgeny Masharov, proposed the establishment of a state-run cryptocurrency fund that would include assets confiscated in criminal proceedings. Revenues from such assets could be used to finance various social projects, he suggested.

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