Article in Britain's Daily Telegraph (FYI, HMRC stands for 'His Majesty's Revenue and Customs' also, the phrase 'holding Bitcoin' is poorly chosen - the phrase 'to seize' would be more apt.)

HMRC to hold Bitcoin under plans to seize crypto from tax dodgers - New government proposals signal latest crackdown on the sector James Titcomb, Daily Telegraph, 7 May 2023

HMRC is considering introducing rules that would enable it to seize cryptocurrency from businesses that fail to pay their taxes.

The Government is mulling proposals that would give the tax agency powers to access online wallets as part of plans to modernise how tax is collected in the digital age.

HMRC is already able to seize funds from bank accounts when individuals fail to pay tax under “direct recovery of debts” powers, but is considering extending this to online payment accounts such as PayPal.

A consultation document from HMRC raises the prospect that this could include businesses’ cryptocurrency wallets if virtual currencies become a common way of making payments online.

The prospect of seizing cryptocurrencies from wallets would be seen as the latest crackdown on the sector, which has been accused of allowing money laundering and criminal activity. Cryptocurrencies such as Bitcoin have been touted as ways to give owners control of their finances outside of government control.

While cryptocurrency wallets that are operated by individuals can only be accessed by the owner, those at centralised online exchanges such as Coinbase, Binance and Kraken could be subject to the rules.

Law enforcement agencies are currently able to seize cryptocurrencies from these exchanges when they detect criminal activity.

“If further regulation is brought in around digital currencies, it may be that cryptocurrency wallets may become a more popular method of paying for goods and services,” a HMRC consultation document says.

It added that “it was unclear how easy this would be due to the fluctuating value of cryptocurrency”.

The Government said it expected to proceed and give HMRC powers to seize funds from digital wallets, although it is unclear if this will extend to cryptocurrencies.

A HMRC spokesman said: “The proposals will help ensure HMRC’s debt collection keeps pace with business practices. E-commerce means new business practices with fewer physical and owned assets held in the UK, which makes it harder for HMRC to collect unpaid taxes using existing powers.

“The responses to this consultation will support the Government in undertaking additional analysis and engagement on the proposals.

“All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that powers are exercised proportionately and consistently.”

Police have seized hundreds of millions of pounds in cryptocurrency linked to criminal operations, often auctioning it off.

HMRC said recently that cryptocurrencies would be added to self assessment tax returns. It will mean an extra £10m a year in capital gains taxes on profits that are not currently reported, forecasters estimate.