The increasing use of cryptocurrencies in recent decades and their widespread use by criminal organizations for illicit transactions has created new challenges for law enforcement across the country. One of these challenges regards seizure of digital assets connected to criminal activity. Although some states have drafted legislation specifically permitting law enforcement officials to seize digital assets connected to criminal activity, most have not. However, even in those states that lack such legislation, law enforcement officers have seized digital assets connected to criminal activity using existing forfeiture laws. The questions digital assets raise for enforcers and legislatures do not end at seizure, however; there is also the question of how to compensate victims when the value of these assets can fluctuate wildly while in government custody.

States with Laws Specifically Addressing Criminal Forfeiture of Digital Assets

The legislatures of Connecticut and Texas have passed laws that directly address criminal forfeiture of digital assets. On June 23, 2025, the Governor of Connecticut signed House Bill 6990.¹ This law, which will take effect on July 1, 2026, lists virtual currency and digital wallets as property subject to forfeiture by its holder to the government, if connected to criminal activity.²      However, even prior to this law, Connecticut state law enforcement officers seized digital assets connected to criminal activity. On August 9, 2024, the Connecticut State Police and the Statewide Protection Bureau seized over $63,500 in cryptocurrency from an alleged fraudster who was accused of using a phishing scheme to steal over $68,000 from a Connecticut resident.³

Texas also recently passed legislation permitting state law enforcement officers to seize digital assets connected to criminal activity. Senate Bill 1498, which took effect on September 1, 2025, specifically addresses forfeiture of digital currencies by expanding the definition of “contraband” that can be seized to explicitly include “digital currenc[ies], non-fungible token[s], or stablecoin[s].”⁴ This law establishes clear guidelines for the seizure, storage, and forfeiture of digital assets under Texas law.⁵ Interestingly, much like law enforcement authorities in Connecticut, officials in Texas seized digital assets prior to the enactment of this law. In 2024, officials from the Houston Police Department traced and seized cryptocurrency that had been sent to a global exchange.⁶ In that case, the victim had been allegedly defrauded into sending over $800,000 worth of Tether (USDT) and Ethereum, two commonly used cryptocurrencies, via several transactions to a fictitious platform.² The Houston Police Department seized $200,000 worth of cryptocurrency and returned it to the victim.²

Law enforcement officials in both Connecticut and Texas have thus seized digital assets before enacting legislation explicitly allowing them to do so. This suggests other state governments may be successful in attempting to seize digital assets under their existing criminal forfeiture laws, even when those laws do not specifically address those assets.

States Without Laws Specifically Addressing Criminal Forfeiture of Digital Assets

In several states―including Virginia, Ohio, and New Jersey―law enforcement has seized digital assets despite the lack of any legislation directly permitting such forfeiture.

In Virginia, several forfeiture laws allow the government to seize “property” connected to criminal activities such as money laundering and drug offenses.⁷ The definition of “property” in these provisions is broad enough to encompass digital assets. For example, the Code of Virginia § 19.2-386.19 allows for seizure of all property used in substantial connection with money laundering.² In addition, the Forfeited Asset Sharing Program Manual, authored by the Virginia Department of Criminal Justice Services, further demonstrates that digital assets may be included in the types of property subject to criminal forfeiture under Virginia law.⁸ This manual reads: “there are no restrictions as to the types of property that may be seized. According to the Code of Virginia, § 19.2-386.22, all money and property used in substantial connection with the manufacture, sale, or distribution of controlled substances or marijuana can be seized by a law-enforcement agency.”²

With this broad forfeiture authority, officials in Virginia have seized digital assets connected to criminal activity on previous occasions. The Loudoun County Sheriff’s Office announced its seizure of $1.4 million in stolen cryptocurrency “as one of the first and the largest seizure of its kind in Virginia” following an alleged “pig butchering” scam.⁹ A pig butchering scam is when fraud victims are manipulated by nefarious means to invest in fake cryptocurrency platforms.²

Similarly to Virginia, no Ohio state laws specifically grant the government authorization to seize digital assets connected to criminal activity. However, Section 2981.02 of the Ohio Revised Code provides a broad definition of property subject to forfeiture to the state.¹⁰ Further, in April of 2025, the Electronic Financial Investigations Unit of the Ohio Bureau of Criminal Investigation recovered $35,600 in Bitcoin for an Ohio woman who had fallen victim to an alleged cryptocurrency scam.¹¹

In New Jersey too, no state laws specifically permit its government to seize digital assets connected to criminal activity. However, Section 2C:64-1 of the New Jersey Code of Criminal Justice explicitly states that “proceeds of illegal activity” are subject to forfeiture by the government.¹² This statute also provides that “property which has become or is intended to become an integral part of illegal activity” is subject to forfeiture by the government.¹³ Digital assets often constitute the “proceeds of illegal activity” and may also be an “integral part of illegal activity”; thus this law may be interpreted as permitting seizure of digital assets in some cases. According to a blockchain intelligence firm that assisted in the asset recovery, the Cinnaminson Township Police Department seized cryptocurrency that were obtained via alleged fraud from a citizen of the community.¹⁴ An individual based outside the U.S. allegedly posed as a U.S.-based law enforcement officer or a bank official and extorted the victim to pay him Bitcoin in order to avoid being arrested.¹⁵

Although the legislatures of Virginia, Ohio, and New Jersey have not enacted legislation specifically permitting law enforcement to seize digital assets connected to criminal activities, they have been doing so under existing criminal forfeiture laws. This further demonstrates that digital assets are subject to criminal forfeiture even in states where no laws specifically allow such forfeitures.

Value Fluctuations after Seizure

An important issue accompanies the seizure of digital assets: how governments should address changes in their value while they are in government possession. Many digital assets, such as Bitcoin, resemble securities like stocks and bonds in that their value can change dramatically over short periods of time. Although stablecoins are not intended to fluctuate significantly, even they are subject to extreme changes in value due to market conditions, major news events, government regulations, and changing interest rates. It is almost certain the value of digital assets seized by the government will, to some degree, change while in the government’s possession since the value of all cryptocurrencies is ever-changing. This raises important questions about how best to fairly provide restitution to victims, as the assets may have wildly different values when taken by criminals, when seized by the government, and when restitution is made.

Despite the fairness questions that these fluctuations pose, the federal government has not enacted any laws or regulations that specifically address its handling of seized digital assets. However, certain existing rules governing the handling of seized assets generally can be interpreted as applicable to digital assets. Under 28 C.F.R. § 9.8(c), when the government seizes assets connected to criminal activity, the amount that may be restored to victims is limited to the value of the property at the time of criminal loss.¹⁶ Any appreciation in the value of the seized asset occurring after the loss is not passed on to the victim.² For example, if an individual lost $40,000 worth of Bitcoin to an online fraudster and the value of that Bitcoin later increases by 300%, the victim would receive only $40,000 in compensation—rather than the $120,000 current market value—when the government recovers the stolen cryptocurrency. Many experts have interpreted this regulation as “short-changing” victims of cryptocurrency fraud because it prevents them from reaping the financial gains they would have earned if they were not the victims of fraud and if their stolen cryptocurrencies increased in value after the crime.¹⁷

Government handling of seized digital assets is particularly important given the large volume of cryptocurrency fraud that occurs each year. Losses related to cryptocurrency fraud totaled a staggering $5.6 billion in 2023, according to a report produced by the Internet Crime Complaint Center of the Federal Bureau of Investigation.¹⁸ Given the ever-changing value of cryptocurrencies, it can be inferred that the value of many, if not all, of these stolen cryptocurrencies changed between the time of criminal loss and the date on which the victims received restitution from the U.S. government. Considering the prevalence of cryptocurrency fraud and the volatility of cryptocurrencies, it is clear that policies addressing fluctuation in the value of seized cryptocurrencies while they are in government possession is a significant issue.

Conclusion

Government authorities across several states have seized digital assets connected to criminal activity, even in the absence of state laws permitting them to do so. Even in those states that have passed legislation authorizing such seizures, such as Connecticut and Texas, state authorities had previously seized digital assets under criminal forfeiture laws that did not specifically address digital currency. The ability of state officials to seize digital assets, even without express authorization under state law, is important because it allows state officials to fully effectuate the purpose of criminal forfeiture laws―namely, to recover goods that were stolen from private citizens by criminal actors.

An important issue accompanying forfeiture of digital assets by the government is fluctuations in the value of these assets while they are in government custody. At present, there is only one prominent federal regulation that specifically addresses this issue, which allows victims to be compensated for the value of the asset at the time of criminal loss. As adoption of digital assets continues to increase in the foreseeable future, the theft of digital assets will likely rise significantly as well. Given cryptocurrencies’ growing presence, it would be in the best interest of each state to adopt legislation addressing issues around the seizure of digital assets and how to properly compensate victims.

Endnotes

1. Conn. Gen. Assemb., 2025 Gen. Assemb., H.B. 6990, An Act Concerning the Seizure and Forfeiture of Virtual Currency and Virtual Currency Wallets (signed June 23, 2025; chaptered as 2025 Conn. Pub. Act No. 25‑41). [↩]
2. Id. [↩][↩][↩][↩][↩][↩][↩]
3. Connecticut State Police, State Police Detectives Collaborate to Recover More Than $60,000 for Victim of Cryptocurrency Scam (July 17, 2024), https://www.cspnews.org/post/state-police-detectives-collaborate-to-recover-more-than-60-000-for-victim-of-cryptocurrency-scam.  [↩]
4. Texas Leg., S.B. 1498, 89th Leg., Reg. Sess. (Tex. 2025) (enrolled June 20, 2025, eff. Sept. 1, 2025).  [↩]
5. Id.  [↩]
6. Houston Police Seize over $200,000 in Cryptocurrency in Fraud Investigation, TRM Labs (Aug. 15, 2024), available at TRM Labs Insights page. [↩]
7. Va. Code Ann. § 19.2-386.19 (2024). [↩]
8. Va. Department of Criminal Justice Services, DCJS Guidance Document 4853 (June 2, 2021) [↩]
9. Loudoun Cnty. Sheriff’s Office, LCSO Seizes $1.4 Million in Groundbreaking Cryptocurrency Scam Case (Feb. 24, 2025). [↩]
10. Ohio Rev. Code Ann. § 2981.02 (Westlaw through 2025 supp.). [↩]
11. Ohio Att’y Gen., BCI Recovers More Than $35,000 in Stolen Bitcoin for Hamilton County Victim (Apr. 10, 2025). [↩]
12. N.J. Rev. Stat. § 2C:64‑1 (2024). [↩]
13. Id.. [↩]
14. TRM Labs, Cinnaminson Township Police Department Case Study (2024). [↩]
15. Id. [↩]
16. 28 C.F.R. § 9.8 (2025) (electronic ed. 2025). [↩]
17. Elisha J. Kobre, Crypto Fraud Victims Often Shortchanged Due to DOJ Regulation, Bradley (Dec. 17, 2024).  This also raises the question of what should happen in the opposite situation: where seized digital assets decreases while in government custody. One solution is for the victim to receive the value of the cryptocurrency at the time of criminal loss rather than its current depreciated value. Although some would argue that such a practice creates a ‘windfall’ for the victim, the fact remains that the victim could have sold or made purchases using the currency during the period between criminal loss and restitution of the currency to the victim. For reasons of fairness, restitution to the victim following government forfeiture of digital assets from criminals should amount to its value at the time of criminal loss. [↩]
18. Federal Bureau of Investigation, 2023 Cryptocurrency Fraud Report Released, FBI (Sept. 10, 2024). [↩]