The Italian Supreme Court annulled the seizure order of 120.600 euros approx in bitcoins, emphasizing that cryptocurrencies' unique characteristics bans seizure "by equivalence", which occurs when the specific asset to be confiscated is unavailable (and assets of equivalent value are seized instead).
Bitcoin could not be seized by equivalence due to:
Lack of Justification: The court failed to adequately explain the legal basis for equating Bitcoin to euros as the profit from tax evasion. This oversight undermines the legitimacy of the seizure.
Non-Legal Tender: Bitcoin is not recognized as legal tender in Italy. Its value fluctuates and cannot serve as a stable equivalent for fulfilling tax obligations denominated in euros.
Volatility: Bitcoin's value is highly volatile, making it unsuitable as a proxy for the fixed euro amount of the alleged tax evasion.
Nature of Seizure: The seizure targeted Bitcoin instead of euros, constituting a seizure "by equivalence" rather than directly targeting the profit of the crime (the evaded tax). This approach conflicts with the requirement to link the seizure directly to the crime's proceeds.
(automatic machine translation)
Cass. pen. sec. III, ud. Nov. 20, 2024 (dep. Jan. 15, 2025), no. 1760
President Aceto - Rapporteur Giorgianni
In fact
1. By order dated June 14, 2024, the Court of Florence rejected the precautionary review proposed by the appellant against the decree of validation of the seizure issued by the Public Prosecutor at the Court of Florence on May 23, 2024, concerning the sum of money amounting to 120,638.20 euros as the countervalue at the time of the transfer in euros of the BTC amounting to 1.88805294, consideration for evaded taxes for the 2021 tax year.
2. Against the aforementioned order, M.R., through his defense counsel, lawyer Giuseppe Vaciago, appeals for cassation, relying on two grounds of appeal.
2.1 With the first ground of appeal, he complains of violation of the law pursuant to Article 325 co. 1 of the Code of Criminal Procedure for having the Court of Review confirmed the decree of validation of the seizure pursuant to Article 355 of the Code of Criminal Procedure, illegitimately attributing to the virtual currency the nature of profit from a tax crime (page 4 of the contested order).
Premises the defense that the seizure of the virtual currency - 1.88805294 bitcoin - was made and then validated because it was deemed to be the profit of the crime underArticle 4 of Legislative Decree No. 74/2000, for which the appellant is under investigation. Moreover, the defense specifies that if the amount of the evaded tax represents the profit of the crime and is the fundamental element on which the normative construct of the contested crime underArticle 4 of Legislative Decree No. 74/2000 is erected, the evidentiary seizure activity, in order to be legitimate, should be aimed exclusively at the amount of the tax that is considered evaded, namely, in the case at hand, the identified sum of 120,638.20 euros.
Otherwise, in the present case, the evidentiary seizure, carried out substantially for equivalent, illegitimately had as its object an asset represented by bitcoin virtual currency instead of the euro amount of the tax deemed evaded.
The appellant observes that virtual currencies, including bitcoin, are a representation of value not issued or guaranteed by a central bank or public entity, not necessarily linked to a legally established currency, which does not possess the legal status of currency or money, but is accepted by individuals and legal entities as a medium of exchange and can be transferred, stored and exchanged electronically, in essence a digital asset not assimilated to the current currency of a state. Therefore, in the present case, the cryptocurrency was unlawfully considered to be on a par with the only currency that is legal tender within the Italian state, namely the euro, without even giving weight to the fact, which is by no means negligible, that the euro countervalue of bitcoin is subject to continuous fluctuations.
2.2 With the second ground of appeal, he complains of violation of the law pursuant to Article 325 co. 1 of the Italian Code of Criminal Procedure for the fact that the review court only apparently gave reasons for its order (pages 3-4 of the order under appeal).
The appellant complains that the Tribunal dwells extensively on the deemed existence of fumus and periculum, without saying anything about the reasons of law that would have led it to agree with the prosecuting body's orientation, considering the bitcoin cryptocurrency as profit from the crime susceptible to seizure, and why the reasons of law put forward by the defense in support of the request for review would not be well-founded.
Considered in law
The grounds of appeal, which should be examined together because they are related, are founded in the following terms.
1. As a preliminary point, reference must be made to the constant affirmation of this Court (see ex plurimis Sez. 2, no. 18951 of 14/03/2017, Rv. 269656), according to which an appeal in cassation against orders issued on preventive or evidentiary seizures, pursuant toArticle 325 of the Code of Criminal Procedure, is allowed only for violation of the law, in that notion having to include both “errores in iudicando” or “in procedendo,” as well as those flaws in the motivation so radical as to make the argumentative apparatus placed in support of the measure totally lacking or lacking the minimum requirements of consistency, completeness and reasonableness and therefore unsuitable to make comprehensible the logical itinerary followed by the judge. On the other hand, manifest illogicality of the reasoning cannot be deduced, which can be denounced in the judgment of legitimacy only by means of the specific and autonomous ground referred to in subparagraph E) ofArticle 606 of the Code of Criminal Procedure (in this sense, see Sez. Un. no. 5876 of 28/01/2004, Rv. 226710).
2. It should also be premised that the seizure qualified as probative by the prosecutor concerned cryptocurrencies for a countervalue, at the time of the seizure, of 120,635.25 euros, an amount deemed to correspond to the tax evaded in the 2021 tax year with respect to a capital gain, deriving from cryptocurrency trading operations, quantified at 463,993.06 euros.
On the concept of virtual currency Sez. 2, no. 44378 of 26/10/2022, Melis, Rv. 284124, points out that, in Directive 2018/843/EU of May 30, 2018 (amending the so-called. Fourth Anti-Money Laundering Directive), cryptocurrency is defined as “a representation of digital value that is not issued or guaranteed by a central bank or public entity, is not necessarily linked to a legally established currency, does not possess the legal status of currency or money, but is accepted by natural and legal persons as a medium of exchange and can be transferred, stored and exchanged electronically.” the rationale of the rule is evidently intended to regulate the relationship between virtual money and current money, but without correctly defining the phenomenon (regulating “in the negative” the characteristics of virtual money); recital no. 10 of the AML Dir. demonstrates the assumption in that it states that “although virtual currencies can often be used as a means of payment, they could also be used for other purposes and have broader uses, for example as a medium of exchange, investment, as store of value products or be used in Online casinos. The objective of this directive is to cover all possible uses of virtual currencies.”
The definition given by the Italian legislator can be found inArticle 1 of Legislative Decree 231/2007 as amended by Legislative Decree No. 125 of October 4, 2019, where virtual currency is defined (lett. qq) “the digital representation of value, neither issued nor guaranteed by a central bank or public authority, not necessarily linked to a legal tender currency, used as a medium of exchange for the purchase of goods and services or for investment purposes and transferred, stored and traded electronically”; it is immediately noted that this definition expressly adds, compared to that of the EU legislator, the investment purpose.
The aforementioned ruling Sec. 2, No. 44378 of 26/10/2022, in describing the entities operating in the field of virtual currencies, notes that an exchanger means the entity that operates the exchange platforms, exchange being understood to mean the technological platform that allows this financial product to be exchanged, whose function, therefore, is to be able to enable the purchase and sale of cryptocurrencies and to make a profit; “providers of services related to the use of virtual currency” were included among the cc. dd. subjects obliged (art. 3, paragraph 5, lett. i), Legislative Decree no. 231/07) to enroll in a special register kept at the OAM - Body exclusively and independently competent for the management of the Lists of Agents in Financial Activities and Credit Brokers - with the related obligation to notify the Ministry of Economy and Finance (art. 17 bis, paragraph 8 bis, Legislative Decree no. 141/2010): with the Fourth and Fifth EU Anti-Money Laundering Directives, transposed respectively by Legislative Decree no. 90/2017 and Legislative Decree no.. 125/2019, specific obligations were provided for against the exchanger (bitcoin et similia exchanger, defined as any natural or legal person who provides third parties, in a professional capacity, including online, with services functional to the use, exchange, storage of virtual currency and their conversion from, i.e., into, legal tender currencies or digital representations of value, including those convertible into other virtual currencies as well as the services of issuing, offering, transferring and clearing and any other service functional to the acquisition, trading or intermediation in the exchange of the same currencies, Art. 1, paragraph 2, lett. ff, Legislative Decree No. 231/2007) and the wallet provider (virtual wallet managers, defined as any natural or legal person who provides, to third parties, on a professional basis, including Online, services for the safeguarding of private cryptographic keys on behalf of their clients, in order to hold, store and transfer virtual currencies, Art. 1, paragraph 2, lett. ff bis)), both included in the category “other non-financial operators.”
It was, therefore, affirmed that, where virtual currencies are used as financial investment instruments, trading is subject to compliance with the rules on financial intermediation, including the necessary qualification of the intermediary subject (Sec. 2, Judgment No. 26807 of 17/09/2020, De Rosa, Rv. 279590.
The drawbacks and risks associated with bitcoins are, therefore, easily perceived: they are not issued by a central bank or other public authority, and the nominalistic principle does not apply to them, as they are mostly devoid of regulation, at least binding regulation. They do not perform the typical functions of currency, as a unit of account and store of value, because of their lack of liberating power in payments and their extreme volatility: there is no one who can authoritatively stabilize their prices, and hence the exchange rate fluctuations that generate uncertainties in conversion.
3. That being said, the order of the Court of Review upheld the decree of validation of the evidentiary seizure of the sum of 120,638.20 euros qualified as the body of the crime, as a profit of the crime referred to inArticle 4 of Legislative Decree No. 74 of 2000.
However, the order is, on the one hand, lacking in motivation regarding the assumption of the evidentiary purpose pursued as a function of fact-finding (Sez. U, No. 5876 of 28/01/2004, Bevilacqua, Rv. 226710), making reference to the acts of the Public Prosecutor's Office referred to in the decree of validation of evidentiary seizure, without illustrating their content, and, on the other hand, in qualifying as profit of the crime referred to inArt. 4 Legislative Decree No. 74 of 2000, the amount of evaded tax linked to capital gains from cryptocurrency trading operations through accounts opened at different exchanges, affirms the existence of the derivation link between the seized bitcoins and the crime, without adequately confronting the criticisms contained in the appeal.
In fact, the defense's point is right on the mark when it notes the irreconcilability of the grounds of the Court of Review, which, by valuing the existence of the derivative link between the object of seizure (bitcoins) and the crime, with respect to a profit from the crime consisting of an evaded tax quantified as 120.638.20 end up legitimizing a probative seizure of the profit of the crime, not direct, but for equivalent, because it falls not on currency that is legal tender in the State, used to make payments and having a liberating value of the obligations contracted also towards the Treasury for the extinction of the tax debt, but on a digital asset represented by virtual currency that does not perform the typical functions of currency that is legal tender and is subject to continuous market fluctuations.
4. In conclusion, on the basis of the considerations made, annulment with referral, for further consideration, to the Court of Florence is required.
P.Q.M.
Annuls the appealed order and refers the case back to the competent Court of Florence for new trial pursuant to Article 324, para. 5, Code of Criminal Procedure.