UK Faces Diplomatic Battle Over £5.5bn Bitcoin Claim
3 min read
The UK government faces a diplomatic tightrope as it tries to claim £5.5bn worth of Bitcoin.
On Monday, a woman was convicted for her role in a multi-billion-pound Bitcoin fraud believed to be the largest case in history. Zhimin Qian, 47, pleaded guilty at Southwark Crown Court to illegally obtaining and holding cryptocurrency.
Following an inquiry in 2018, detectives seized 61,000 Bitcoin from Qian, also known as Yadi Zhang.
The UK is trying to keep the majority of the Bitcoin gains, which were originally stolen from financiers in China, the FT has reported. A former Treasury official familiar with the case told PoliticsHome the government must think carefully about how it could access the money without creating a diplomatic schism with China.
“The UK government is now one of the largest holders of Bitcoin in the world. Assuming the courts are happy, the government can potentially take a large amount of it,” they said.
“There is also a complexity of how you offload it – you would have to do it in a phased way. The market will be impacted. It’s a fascinating case and will set precedents. What will happen to [the] Chinese investors?”
Courts have the power to forfeit criminally obtained assets such as cryptocurrency after a conviction. Once finalised, such assets can become government property and are handled within the Home Office.
The government will then be responsible for how it divides its net proceeds. Given the media exposure, it remains unclear what proportion of the £5bn the UK government will access or use.
The High Court could decide that the victims are only entitled to recover the value of their original investment, estimated at about £640m. The size of the windfall could therefore impact the amount of money required to close the UK's fiscal gap at the upcoming Budget, thought to be around £30bn.
However, the UK has a Mutual Legal Assistance Treaty with China, a co-operation agreement to gather and exchange information to enforce public or criminal laws. The Crown Prosecution Service (CPS) has estimated there were 128,000 victims in this case.
If any of them are identifiable in China, there could be diplomatic pressure for the UK to compensate them or transfer the money to the CCP. At the same time, the UK government has made it a central pillar to improve relations with Beijing to increase international trade and economic growth.
Lord Vaizey, a Conservative peer, chair of the Crypto and Digital Assets APPG, told PoliticsHome: “The wider question is potentially philosophical. The government may acquire cryptocurrency from criminals as they would acquire currency from criminals. Bitcoin is part of an asset class, and there is nothing wrong in principle with holding it as a strategic reserve. In that sense, I don’t see the problem of holding on to it.”
Lord Elliot, a Conservative peer, told PoliticsHome: “The government needs a plan. Is the frozen Bitcoin stored securely? How many Bitcoins are there, and what are they worth? Only when the facts are established can there be a proper debate about whether it should be saved or spent.”
The Treasury was contacted for comment.
