The legal risks and practical considerations of digital asset blacklisting
Key takeaways
- The legal risks and practical considerations of digital asset blacklisting When digital assets are frozen, holders can suddenly be deprived of access to their legitimate assets or income.
- In traditional financial crime investigations, the federal government’s authority to restrain or seize assets is governed by established legal and constitutional safeguards.
- Seized assets are then subject to the federal forfeiture regime, which operates through overlapping authorities, including civil forfeiture under 18 U.S.C. §§ 981 and 983, and criminal forfeiture under 18 U.S.C. § 982.
The legal risks and practical considerations of digital asset blacklisting When digital assets are frozen, holders can suddenly be deprived of access to their legitimate assets or income. Here’s what to know to keep your digital holdings safe. By Galen Kast, Emma Howard|Edited by Betsy Farber May 6, 2026, 3:30 p.m. 4 min read Make preferred on (Gary Alvis/Getty Images)U.S. prosecutors have become increasingly aggressive in freezing digital assets believed to be traceable to illicit activities such as money laundering, “pig butchering” schemes, sanctions violations, and other financial crimes. Digital asset freezes take on a new dimension, however, when the freeze is voluntarily initiated by the issuer at the government’s request, bypassing the legal protections of a traditional asset seizure. In such instances, digital asset holders are often caught off guard, unaware that their funds are allegedly tainted and suddenly deprived of access to assets or income acquired through legitimate means.
In traditional financial crime investigations, the federal government’s authority to restrain or seize assets is governed by established legal and constitutional safeguards. Law enforcement typically must demonstrate a connection between the property and alleged criminal activity and obtain judicial authorization, such as a seizure warrant, before restricting access to those assets.
Seized assets are then subject to the federal forfeiture regime, which operates through overlapping authorities, including civil forfeiture under 18 U.S.C. §§ 981 and 983, and criminal forfeiture under 18 U.S.C. § 982.