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Can Bitcoin or any other cryptocurrency be confiscated?
I am just a regular Joe that is tired of paying high fees, and that understand the game th...
1 week ago
Bitcoin or any other cryptocurrency can be confiscated but it depends on how you use it and how you store your private keys otherwise cryptos should be bulletproof. You are told by many that Bitcoin can't be confiscated or seize by any third party or government, that is not totally true but it depends also if the user has made his or her homework to keep safe whatever satoshis a person may have.
If you store your cryptocurrencies with third parties like exchanges or custodial wallets your Bitcoin or any other crypto asset can be seized at request not only by the government but also by the actual party that is holding your private keys. This includes services like Wallet of Satoshi, Strike, Blue Wallet, Coinbase, Gemini, Binance, and many others. They can seize your funds because they control the private keys and every time you need to move your money you actually have to ask for permission to do, so when using those services any government agency can send a letter to those services to stop serving you or even halt any transactions you may have until they can either verify you or seize your funds. Custodian services and wallets are essentially just another bank-like services and it is almost like PayPal in that respect.
Another way that your funds can be seized is if you send your funds from your private wallet to a custodian exchange or wallet, once funds leave your wallet they are no longer yours. You could lose your funds if your exchange suspect that your coins were involved in illegal activity such as ransomware, illegal sells of drugs, or any other illegal activity, any centralized exchange or custodian can seize your funds because of that or by any other reason that those services may or may not specify or give you notice of.
Another way that you could lose your coins or your coins could be seized is if you share your private keys with a third party being that a person, company, or the government, anyone that has your private keys has access to your money as well. So never share your private keys with anyone. You could get your funds seized or stolen if a hacker gets access to your wallet.dat file, or can read your seed words.
Many wallets now encrypt your wallet.dat file and also other wallets required a password as well for the seed words in order to unlock and restore a wallet from a seed phrase which means that if you give your passwords to third parties they could unlock your private keys if they have access to your private keys as well.
A government could force you to give your private keys and password by either threaten you with harder convictions if you don't spill your passwords or could also torture you so that you tell them your passwords, private keys, and backup locations, also governments could ask your exchanges to give them your funds as part of a criminal investigation. Another way will be to force brute your passwords with supercomputers which the government has access to, as well as hacking into your devices where your funds were saved as well.
All of the vulnerabilities mention before are ways not just for your funds to get seized by the government but also for hackers could get access to your funds using the same tools governments use. And the best way to protect against that is if you have a large number of assets to split them in at least 3 different wallets and if possible write down the seed phrases, and if you must keep a digital copy of your seed you must encrypt them with at least 3 passwords that are different.
When saving private keys on a hard drive or external storage unit it is always a good idea to encrypt the actual device with a password, encrypt the folder which holds the files, and put passwords to the actual word document or text document, if you are going to upload to online storage make sure you are using a different password and your storage service provider supports 2FA.
The reason I am bringing the case for losing your coins is that lately, I read in the news that the hackers that hacked the oil pipeline got their coins seized by the US government, and up to this point we don't know how the government was able to seize the hackers' coins, we can only speculate on how the government did it. But just in case make sure that your private keys are well saved and protected with a strong password.
The title of the news read like this:
The U.S. seizes $2.3 mln in Bitcoin paid to Colonial Pipeline hackers.
The whole reason I wrote the article is to pretty much try to explain the way to seize Bitcoin from users, and yet we don't know exactly how the US government actually got access to the coins seized on the Colonial Pipeline case. So try to keep your coins safe and try to prevent an event like that to happen to you.