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If the seizure of any cryptocurrency or NFT is necessary in Italy, how should it be done?
This article will outline both the main issues and best practices to be followed, from the identification of assets attached to a defensive strategy and possible solutions to the problem. Although they differ, NFTs and cryptocurrencies demonstrate a certain resilience toward enforcement. Due to their nature, in fact, in the context of asset attachment, numerous practical issues are encountered, from identifying attachable assets to their actual seizure.
The application problems of a seizure or other form of enforcement on cryptocurrencies vary. For example, the question arises as to whether or not, from the perspective of possible enforcement actions, the subject of the seizure corresponds to the physical wallet. It is advisable to take preventive action consisting of transferring the various assets from the debtor’s wallet to the judicial wallet. Failing this, the debtor will always be able, thanks to the inherent functioning of the crypto wallet, to virtually reconstruct his account and, subsequently, transfer his assets to a third wallet could dangerously result in the termination of the enforcement proceedings due to the lack of attachable assets.
The difficulty in discovering whether the debtor owns a certain amount of cryptocurrency. At this point, the creditor could become aware of this
- informally (e.g., one learns, even indirectly, that the debtor owns cryptocurrencies or accepts them as a means of payment);
- through a search of the assets to be attached electronically under Article 492-bis of the Code of Civil Procedure, thus accessing the tax registry; and
- through the imposition of particularly stringent identification requirements on the head of all entities that provide services related to virtual wallets and associated with the use of virtual currency established by the Italian Decree of the Ministry of Economy and Finance of January 13, 2022.
Depending on the problem found in the specific case, three different situations may arise depending on the defense strategy chosen in light of the subject matter of the attachment; therefore, one may proceed to the:
- execution in specific form by demanding the delivery or release of the property if the property attached by the creditor corresponds to that owed by the debtor;
- execution in general form if, as a result of the debtor’s insolvency, his property is generally identified and converted into money until the debt is paid, with the result that there will be no coincidence between the attached property and the property obtained;
- third-party expropriation, where the debtor is not the asset’s direct owner but uses a third-party intermediary (so-called Exchange) to carry out the transactions.
Regarding, then, a possible strategy to be adopted in case future execution on crypto-assets is envisaged, it is possible, for example:
Before the commencement of the trial on the merits, if the requirements established by law are met, apply for an emergency measure having to do with:
- a measure by which the court orders the delivery of keys referring to one or more wallets (non-compliance with which will result in the imposition of a financial penalty); and
- a seizure to be effected by transferring the crypto-assets to a wallet created ad hoc by the court. thereafter, institute judgment on the merits requesting, as the case may be, an order for payment or delivery and possibly confirmation of the above coercive measure.
If the debtor, however, turns out to be null and void, an impasse would be reached. Thus, at the attachment stage, the bailiff will invite him to indicate additional attachable assets and, in case of reticence or false declaration, the crime of willful failure to execute a court order (Art. 388 of the Criminal Code) may be involved.
What has just been described may provide food for thought on how to proceed should one come across enforcement cases involving cryptocurrencies or, more generally, cryptoassets, and in any case, considering the forthcoming evolution of the regulatory framework for cryptocurrencies and NFTs, it is to be hoped that more certain remedies and procedures will be validated and endorsed by the legislature.
On a similar topic, you may find interesting the article “Metaverse and cybersecurity, what challenges for the future?“.