It looks as if it’s already time to update Monday’s assessment of the Netherlands as one of Europe’s Bitcoin centers.

According to Dutch newspaper Trouw [NL and paywall], the country’s Openbaar Ministerie, or public prosecution office, can take a suspect’s digital currency and put it in a new wallet as part of an investigation.

-Someone didn't make up their minds yet

As reports:

“Once the bitcoins have been transferred to the justice ministry they are immediately cashed in. So far several hundred pieces of the virtual currency have been confiscated, worth several hundred thousand euros.”

The key here, that news site reports, is three rulings by Dutch judges that allowed Bitcoins and other digital currencies to be classified as “objects,” thus subject to confiscation per Dutch law.

Practical, Ethical and Other Matters

OK, that covers the Dutch government’s legal ability to grab a suspect’s money. But in practice? That could be much harder. How could law enforcement officials coerce someone to divulge his or her private keys? What if that user had a multisig wallet?

Bitcoin Foundation Executive Director Jon Matonis, who wrote about key disclosure laws for Forbes in 2012, told us that a user's memory could present a big enough obstacle to prevent most forms of bitcoin confiscation.

“Financial privacy is a fundamental human right, which even includes 'knowledge of balance' existence and/or protection from unsanctioned access.

“With brainwallets or encrypted wallets, confiscation of bitcoin would only be possible with consent of the wallet holder or some form of torture to obtain the relevant passphrases.

“Any party or group forcibly demanding key disclosure in violation of this privacy principle commits a human rights violation, which could be subject to criminal prosecution similar to the prosecution of international war crimes.”

Coinify's Lasse Birk Olesen took the idea one step further by introducing the possibility of a second brainwallet, “One with a small sum of bitcoins to reveal to the confiscator to make him believe he already got everything there is, and a second wallet to keep secret that contains the majority of the owner's coins.”

The practical matter of confiscating bitcoins becomes considerably more complex with just the introduction of another brainwallet. How prepared are Dutch investigators to exercise their legal right of confiscation?

Perhaps we will see these issues play out soon as test cases in the Netherlands. In the meantime, Dutch readers, there is still time to celebrate your country’s first two-way Bitcoin ATM, which was just installed in Amsterdam recently.


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