Brazil passes law turning seized crypto into public-security war chest

The law lets authorities use crypto seized during investigations and expands their power to freeze, block or seize funds in a bid to crack down on criminal organizations.

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What to know:

• A new law allows Brazilian authorities to use cryptocurrency seized from criminal organizations to fund public security efforts, such as police equipment and training.
• The law enables authorities to provisionally use seized cryptoassets, with a judge's approval, and expands judicial authority to freeze, block or seize cryptoassets during investigations.
• The legislation also aims to combat organized crime by increasing the penalties for using encrypted messaging apps or privacy tools to conceal activity, and enables international cooperation for asset recovery and intelligence sharing.

Brazilian President Luiz Inácio Lula da Silva signed into law a sweeping set of reforms aimed at dismantling organized crime, and cryptocurrencies are at the center of the strategy.

Under Law No. 15.358, enacted March 25, cryptoassets confiscated from criminal organizations can be funneled into Brazil’s public security system.

This includes funding for police equipment, intelligence operations and officer training. The law explicitly allows the provisional use of these assets before a final conviction, provided it is approved by a judge.

Rather than treating seized cryptocurrencies as a potential reserve of value for the state, an idea floated by some crypto advocates, the government is using it as a tool in the crackdown on groups like the PCC and Comando Vermelho.

The decision aligns with Brazil's broader efforts to modernize the justice system's handling of digital property and organized crime.

The legislation also significantly expands judicial authority to freeze, block or seize cryptoassets during investigations, including suspending access to exchanges, digital wallets and online platforms. Once convicted, individuals permanently lose access to the formal financial and crypto systems.

The law defines the use of encrypted messaging apps or privacy tools to conceal criminal activity as an aggravating factor, increasing potential sentences.

It also enables international cooperation for asset recovery and intelligence sharing, and creates a national criminal database integrating financial structures of known criminal groups.

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