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Finnish Customs sits on millions in seized cryptocurrencies

A Customs official said the agency doesn't want to see €15m in bitcoin seized years ago be returned to criminals.

Bitcoin -kolikkoja tumman taustan päällä.
When the 1,666 bitcoins were first seized by Customs, they were valued at less than 700,000 euros. But since then, the price zigzagged from a peak of 20 million down to 5 million and back up to where it stands now: at 15 million euros. Image: AOP

Finnish Customs has a 21st century problem. The agency is unsure about what to do with 1,666 bitcoin it seized years ago in a major drug bust, but has not yet converted the cryptocurrency into regular euros.

Customs had plans as recently as the spring of 2018 to auction off its blockchain-based currency but decided against it due to concerns that the virtual money would return to the hands of criminals.

The agency has still not found a solution about what to do about the sums in its bitcoin wallet, the value of which amounted to nearly 15 million euros on Monday according to cryptocurrency exchange rates.

"From our point of view, the problems are specifically related to the risk of money laundering. The buyers of [cybercurrency] rarely use them for normal endeavours," Customs' finance director, Pekka Pylkkänen, said.

In addition to the roughly 15 million euros it seized in bitcoin, Customs also has a virtual cache of millions of euros in other cryptocurrencies it acquired while investigating other criminal cases over the years.

Bitcoin and other cryptocurrencies are based on blockchain technology which, put simply, are digital assets that can be sent peer-to-peer without the need for a centralised party, such as a bank. This decentralisation effectively bypasses the services -- and the scrutiny -- of traditional financial institutions.

However, Finland's Financial Supervisory Authority (FIN-FSA) officially began regulating the crypto currency sector in May of last year.

Many ways to sell, experts say

The cryptocurrency experts who spoke with Yle do not fully share the concerns Customs has about its cache of virtual cash.

According to Juri Mattila, a researcher at Etla, the Finnish Institute of Economic Research, bitcoin is not used for criminal purposes as much as it was in the past.

"Nowadays there are other virtual currencies that are more difficult to track [by authorities] than bitcoin which may now be used in criminal activities," Mattila said.

The founder of cryptocurrency firm Prasos, Henry Brade, told Yle that the vast majority of bitcoin buyers are investors, not criminals, adding that there are enough legitimate investors to buy up Customs' virtual currencies.

"Of course, if Customs sold off the bitcoin anonymously, the risks would be massive. But if they sold them in a sensible manner, I don't see a problem here," Brade explained.

Brade, who is one of the country's foremost experts on cryptocurrency markets said Customs has several options from which to choose. One way is that the agency could gradually sell off its bitcoin on the cryptocurrency market until all of it is sold off.

Another option, according to Brade, would be to sell the bitcoin off in larger chunks via a securities broker to one - or more - larger buyers.

"The bitcoin market is very large and a sum like that would not be a problem for buyers' liquidity," Brade said.

The two experts both said a public auction would also be possible, noting that the countries of Australia, the US and Sweden had done so.

"If a one-off auction sale to a large buyer concerns [Customs], why not auction it off in smaller batches?" Mattila asked aloud.

Customs' security concerns

But if there are many legitimate avenues to cashing in on its amassed bitcoin, why does Customs find them unacceptable?

According to Customs' Pylkkänen, that's not the case, but rather it is that the agency does not want a bitcoin sale to attract the wrong kind of attention. He said Customs has to take matters of its own security into consideration.

The value of bitcoin is widely known to fluctuate wildly - and its price can go up or down by each passing minute. At the end of 2017, the virtual currency hit an all-time high of more than 18,000 euros per bitcoin, but is now valued at about half of its highest value, or just over 8,800 euros, according to crypto exchange data.

When the 1,666 bitcoin were first seized by Customs, they were valued at less than 700,000 euros. But since then, the price zig-zagged from a peak of 20 million down to 5 million and back up to where it stands now: at 15 million euros.

Does Customs plan to hold onto the bitcoin until its value takes a likely inevitable tumble?

Not according to Pylkkänen. However, he noted that if the agency were to sell off the bitcoin, the proceeds would simply be funnelled into the "state's bottomless treasury."

Customs' current bitcoin situation is unique, as most of the revenue the agency generates comes from the auction of old seized vehicles.

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