New provisions for securing crypto assets in the Austrian Code of Criminal Procedure

Executive Summary

• For the first time “crypto assets” (“Kryptowerte”) are defined in a separate term in Austrian criminal law, and are included within a broader definition of the term “assets” (“Vermögenswerte”).
• Crypto assets can be secured by transferring them to a “government wallet” (“Behördenwallet”) or by means of a third-party prohibition. This can also be utilized to secure claims under civil law.
• With court approval, crypto assets can be realised prematurely and may also, for instance, be “converted” into Euros.

Introduction

This article has been prepared to provide information about the latest changes to the Austrian Code of Criminal Procedure (“StPO”) affecting the securing of crypto assets. The aim is to provide a structured review of recent amendments to the StPO, with a focus on the newly added definition to the term “asset” in Section 109 Z 1a StPO and the introduction of the government wallet system. Moreover, the possibility of premature realization of crypto assets is addressed.

1. Crypto assets in transition – from a niche phenomenon to mass market

In recent years, Crypto assets such as Bitcoin, Ethereum and NFTs have evolved from a peripheral phenomenon known only by IT experts, to broadly recognized assets. Banks, insurance companies and private investors are investing billions in them. The appeal of these digital assets lies primarily in their anonymity and rapid, global transferability – characteristics, that make them notably attractive to criminals. Considering to the inclination towards the darknet for illegal services and goods, which are often paid with cryptocurrencies, money laundering has never been easier.

2. Legislators are establishing new foundations

To prevent criminals from accessing their digital assets, the Austrian legislature has  comprehensively reformed the Austrian Criminal Code of Procedure with the Criminal Procedure Amendment Act 2024 (“StPRÄG 2024”). The aim is to streamline the securing of crypto assets, both as a matter of law and technically.

3. Broad legal definition of “assets”

At the heart of the reform is the new technology-neutral definition of the term “asset” in Section 109 Z 1a StPO, which now combines with the predominantly used term “object” (“Gegenstand”). As a result of this addition, the previous object-related focus has been dismantled, and the reference to  “assets” has been comprehensively broadened.

The newly defined term now covers not only tangible objects, but also explicitly intangible and digital assets such as cryptocurrencies, tokens and NFTs. This encompasses  both established coins (e.g. Bitcoin, Ethereum) and new blockchain innovations such as stablecoins, utility tokens and e-money tokens. In addition, all related information, for example wallet addresses, private keys and transaction data, are considered as assets.

4. Securing and government wallets

The securing of assets generally serves to provisionally establish the power of disposal over them. However, in previous attempts to establish a power of disposal over blockchain-based crypto assets, the process ran into technical limitations. The newly developed possibility of transferring crypto assets to government wallets (Section 114 (1a) StPO) was created specifically to counteract these deficiencies. The transfer enables the criminal investigation department to take sole control of the targeted  crypto assets and to secure them by storing them securely within the authority’s own infrastructure.

The newly-introduced legal basis now enables the effective securing of crypto assets by transferring them to a controlled government wallet, maintained by the criminal investigation authority.  As a new private key, wallet password or the corresponding “seed phrase” is created, stored and managed on the authority-owned infrastructure, the authority establishes  sole control over the crypto asset.

In general, the act of securing of assets is ordered by the public prosecutor’s office, but in certain cases, the police may have the right to  act independently. In practice, this covers cases in which items were taken from the victim in the commission of a crime or items found at the scene of the crime.

5. Premature realization

The new StPRÄG 2024 consolidates the provisions regarding realization of assets in general and extends them to crypto assets. Premature realization pursuant to Section 115e (1) StPO is now also possible in cases of significant value fluctuations. The aim is to enable the rapid and simple realization of crypto assets, including, as based on a court order, to be converted into Euros.

The “significance” of the fluctuation in value must be assessed on a case-by-case basis, depending on  the relevant economic transaction. Previous case law and literature on significant impairment will serve as guidelines.

Authors: Felix Eggenburg and Kathrina Etler