The current process for recovering lost or stolen crypto assets is often described as inefficient, troublesome, complicated, and expensive. But it doesn’t have to be.
This is the view of Marcin Zarakowski (Head of Token Recovery) who says that many of these issues are self-imposed by blockchain companies.
Token Recovery specialises in the recovery of stolen digital assets and is committed to bringing compliance, accountability, and a solution to the industry for lost or stolen digital assets.
As a member of the Crypto Valley Association, one of the oldest and most mature organisations grouping companies in the blockchain and digital asset sector, and the Global Blockchain Business Council, the largest organisation in the field, Token Recovery is providing its assistance for recovering lost/stolen digital assets to the BSV blockchain and other blockchains around the world.
People see the process of reclaiming lost tokens as inefficient because of the peer-to-peer nature of blockchain transactions and the fact that there is no immediate centralised entity to seize and freeze assets, he said.
‘This means that usually, the only possibility for assets to be frozen and seized is when they land on one of the centralised virtual asset service providers (VASPs) like crypto exchanges, brokers, or onramp/offramp providers.
‘From my experience, what criminals and fraudsters do when they steal the asset, is they want to off ramp into fiat currency as soon as possible. So there is this race where you want to be faster than the criminals, and we need to have centralised service providers to help collaborate in this process,’ he said.’
So that’s why the process is inefficient. If the assets end up on unhosted wallets, there’s nothing we can do unless they are in stablecoins like USDT or USDC, where Tether and Circle, respectively, act as issuers and have capabilities to freeze and effectively reassign stolen coins.’
Zarakowski noted that the Digital Asset Recovery process introduced on the BSV blockchain addresses these concerns by allowing 100% efficiency of freezing and seizing of the coins, as these actions do not require any VASPs or a stable coin issuer’s involvement but instead happen directly on the blockchain level.
More regulations needed?
While this is a growing area of interest for law enforcement and regulations, Zarakowski said that introducing more regulations in the space is not necessarily the top priority. Instead, what is important is how existing regulations are enforced, he said.
‘The problem is that, as I mentioned, law enforcement is heavily under-resourced and overwhelmed when it comes to crypto-related crimes. This is also still a new phenomenon for many of them, and they need to have the right tools,’ he said.
He noted that large government agencies have entire teams dedicated to crypto-asset crimes, but that the required skills and knowledge decreases at the local and state levels.
‘We do training in countries like Poland, Ukraine, and Kazakhstan. And we train law enforcement agents, prosecutors, supervisory, financial intelligence units, specialists, national bank experts, etc. So sometimes it may require regulatory changes in those jurisdictions, but very often it’s all about developing skills, raising awareness, and knowledge sharing,’ he said
BSV blockchain and digital asset recovery
The BSV blockchain is the only blockchain that allows legal recourse for lost asset (token) recovery to legally rightful owners by design. The same system can also allow for freezing assets based on court injunctions and legal notices.
This process enables the blockchain system to work under precisely the same legal system that any financial system currently is subjected to in law. It also discourages any illegal activity that the open and public ledger can face by malicious actors.
An affected party would typically approach a firm like Token Recovery first if they have been a victim of a theft or hack. Token Recovery will assess the case, conduct necessary tracing and investigations and coordinate the legal strategy aimed at obtaining a necessary legal title to the stolen assets. It is also possible that the affected party obtains the required court order themselves or with the help of other lawyers or experts.
The Token Recovery team will then ensure that the party has all of the necessary documents to initiate the Digital Asset Recovery process on the BSV blockchain. This court order will then be handed over to the BSV Blockchain, as the steward of the BSV blockchain which will follow the requirements of the court order and the processes established in the Network Access Rules.
It is important to note that, according to the Network Access Rules on the BSV blockchain, the assets can be frozen or reassigned only based on a court order which is valid and enforceable in the UK or Switzerland. In case of foreign court orders, they need to be first recognised in the UK or Switzerland.
