March 11, 2025

Enhancing Law Enforcement’s Role in Expanding the US Strategic Bitcoin Reserve

Last week, President Donald Trump signed an executive order (EO) establishing a Strategic Bitcoin Reserve. The goal is to leverage Bitcoin assets seized through criminal or civil asset forfeiture without imposing additional costs on taxpayers. The EO also establishes a separate Digital Asset Stockpile, which will manage forfeited digital assets other than Bitcoin, such as Ethereum, XRP, ADA, and Solana.

The US government is among the largest sovereign holders of Bitcoin, with assets primarily acquired through law enforcement seizures of ill-gotten digital assets. In 2023 alone, US law enforcement agencies — including the FBI, IRS-CI, US Secret Service, DEA, US Postal Inspector Service (USPIS), Homeland Security Investigations (HSI), and others — reported seizing and/or forfeiting over USD 3 billion in digital assets. The numbers are detailed in annual reports from the DOJ and the US Treasury Department.

The Strategic Bitcoin Reserve was established to retain these assets as a national store of value, ensuring that cryptocurrency obtained through forfeiture is not prematurely liquidated. However, law enforcement agencies can further expand Bitcoin holdings without additional taxpayer burden.

By utilizing blockchain intelligence tools and trained federal agents, this strategy maximizes efficiency, empowering federal law enforcement agencies to generate billions in seized funds while compensating victims and funding law enforcement initiatives. In fact, simply focusing on the administration’s priorities–border security, Chinese money laundering networks, and cartels, law enforcement agencies can utilize blockchain intelligence to seize and forfeit funds.

By refining seizure protocols, improving legal asset management, strengthening blockchain intelligence capabilities, and leveraging public-private partnerships, law enforcement can significantly increase Bitcoin acquisitions while ensuring compliance with victim restitution and law enforcement funding mandates.

In this post, we’ll take a look at a detailed roadmap US law enforcement agencies can use to maximize Bitcoin retention by leveraging existing legal authorities, modernizing seizure strategies, and implementing operational improvements.

Understanding seizure and forfeiture: Legal and procedural frameworks

There is often confusion between the terms “seizure” and “forfeiture.” But understanding the difference is critical to how the US government funds the Strategic Bitcoin Reserve, compensates victims, and finances law enforcement activities.

Seizure refers to the temporary confiscation of assets based on probable cause that they are linked to illegal activity. At this stage, the government does not own the assets, but prevents their movement pending judicial proceedings. Seizures typically require a warrant, indictment, or administrative authority under federal law.

Forfeiture is the permanent transfer of ownership to the US government after a court ruling confirms that the assets were involved in or derived from criminal activity. Once forfeited, the government gains full authority to liquidate, retain, or reallocate the asset based on statutory requirements. Per the EO, in the case of the Bitcoin reserve, forfeited assets would only go into the fund after any victims are compensated.

There are two primary types of forfeiture:

Criminal forfeiture: Requires a criminal conviction and is limited to assets directly linked to the convicted defendant.
Civil forfeiture: Allows law enforcement to seize and forfeit assets based on their connection to criminal activity, regardless of whether an individual is charged or convicted. This makes it particularly effective for seizing Bitcoin from anonymous cybercriminals, darknet operators, and uncooperative foreign actors.

Both forms of forfeiture have played a key role in government Bitcoin acquisitions, with civil forfeiture often used in cases where direct criminal prosecution is impractical.

Key statutes governing Bitcoin seizures and forfeitures

Several federal statutes are referenced in the EO, and provide the legal foundation for law enforcement agencies to seize and forfeit illicit Bitcoin.

31 U.S.C. § 9705 – Treasury Forfeiture Fund (TFF)

Authorizes the Secret Service, IRS-CI, and ICE/HSI to retain proceeds from forfeited assets.
Allows forfeited funds to be used for law enforcement operations, victim restitution, and asset management costs.
Enables Treasury-affiliated agencies to retain forfeited assets rather than liquidating them.

28 U.S.C. § 524(c) – DOJ Asset Forfeiture Fund (AFF)

Administered by the DOJ, collecting proceeds from forfeited assets handled by the FBI, DEA, US Marshals Service, and other federal agencies.
Allows forfeited funds to be used for investigative costs, operational expenses, and equitable sharing with state and local law enforcement agencies.
Permits retaining forfeited property if it serves a government function, such as strategic asset accumulation.

18 U.S.C. § 981 – Civil forfeiture for financial crimes

Enables seizure of Bitcoin tied to money laundering, wire fraud, securities fraud, ransomware payments, and unlicensed money transmitting businesses.
Allows forfeiture even when individual perpetrators remain unidentified.

21 U.S.C. § 881 – Drug-related forfeitures

Authorizes the seizure of Bitcoin linked to narcotics trafficking.

Executive order on victim restitution and law enforcement funding

The EO establishing the Strategic Bitcoin Reserve outlines clear priorities for forfeited Bitcoin around victim restitution and law enforcement funding.

Victim restitution

The EO states that any Bitcoin directly traced to victims must be returned whenever possible. If returning the Bitcoin is impractical, victims must be compensated in USD equivalent to the forfeiture funds. If victims do not claim assets within a statutory period, the Bitcoin can be allocated to the Strategic Bitcoin Reserve.

Law enforcement funding

The EO also states that agencies may liquidate a portion of forfeited Bitcoin to fund cybercrime enforcement, asset management, and seizure operations. Plus, these agencies must retain a minimum percentage of all forfeited Bitcoin in the Strategic Reserve. This Bitcoin-for-law-enforcement reinvestment model allows agencies to fund blockchain intelligence tools using forfeited crypto assets instead of tax dollars.

Law enforcement strategies to expand the Bitcoin Reserve

Expanding the US Strategic Bitcoin Reserve requires a multi-pronged approach, leveraging legal, operational, and technological advancements to maximize Bitcoin recoveries. Law enforcement agencies, in particular, play a critical role in identifying, seizing, and forfeiting illicit Bitcoin — ensuring that assets are either returned to victims, retained in government reserves, or used to fund further investigations.

Let’s take a look at six key strategies law enforcement can implement to increase Bitcoin seizures, improve asset management, and enhance forfeiture policies — ensuring the government retains more digital assets while upholding legal obligations.

1. Strengthening exchange and custodial seizures through compliance partnerships

Most illicit Bitcoin eventually passes through regulated exchanges, creating a critical choke point for seizure. Law enforcement should work closely to facilitate immediate compliance from exchanges with regards to seizure warrants for identified illicit Bitcoin; automated alerts to exchanges when illicit proceeds attempt to enter their systems; and preemptive freezes on high-risk accounts, limiting criminals’ ability to move the Bitcoin before law enforcement acts.

Actionable steps:

Work closely with exchanges in the US and globally to ensure fast and proactive notification and compliance with subpoenas, seizure warrants, and other law enforcement requests.

2. Ensuring access to blockchain intelligence tools and training‍

Criminals are leveraging increasingly sophisticated methods to launder Bitcoin (including AI agents to scale their illicit operations) — making blockchain intelligence tools more critical than ever for law enforcement agencies seeking to track, seize, and retain illicit cryptocurrency. A recent TRM report shows that for every USD 1 spent on blockchain intelligence tools, agencies recover USD 100 in seized crypto. Expanding access to these tools and standardizing training programs will significantly enhance law enforcement’s ability to increase Bitcoin recoveries.

Actionable steps:

Expand licensing and funding for blockchain intelligence.
Implement TRM’s Crypto Seizure Specialist Certification across US federal law enforcement to ensure specialized training in Bitcoin tracking and seizure techniques.
Ensure collaboration and coordination between US federal law enforcement agencies.

3. Expanding law enforcement’s capability for physical seizures of cold wallets

Criminals often store Bitcoin in hardware wallets, paper backups, or offline storage devices — making physical seizure critical. To ensure the successful seizure of such crypto artifacts, law enforcement teams must enhance their ability to recognize, secure, and extract Bitcoin and other digital assets from physical devices.

Actionable steps:

Train all federal agents in cryptocurrency seizure techniques, ensuring proper handling of cold wallets and seed phrases.
Develop specialized Bitcoin extraction teams within federal agencies, equipped with forensic tools such as TRM Triage for rapid on-site decryption.
Prioritize funding for cybercrime units within the IRS-CI, FBI, and US Marshals Service, prioritizing digital asset confiscation training.

4. Enhancing on-chain seizures and blockchain-freezing capabilities

While law enforcement excels at recovering Bitcoin from exchanges, more illicit transactions are occurring entirely on-chain, requiring different intervention techniques. On-chain enforcement mechanisms allow agencies to intercept Bitcoin proactively, before it reaches traditional financial rails.

Actionable steps:

Expand partnerships with blockchain intelligence firms to improve automated flagging of illicit transactions.
Establish public-private partnerships like TRON, Tether, and TRM’s T3 Financial Crime Unit.

Since its launch in August 2024, T3 FCU has collaborated with law enforcement agencies across five continents, freezing over USD 131 million in assets linked to illicit activity. The initiative combines TRM Labs’ cutting-edge blockchain intelligence technology with TRON and Tether’s commitment to ecosystem security.

*Image from TRM Graph Visualizer illustrating the hierarchical flow of funds in a criminal enterprise*

5. Reforming asset forfeiture laws and implementing structured liquidation policies

Current asset forfeiture laws require that seized Bitcoin be auctioned, often converting it to cash. This approach limits the government’s ability to retain Bitcoin as a strategic asset, missing opportunities for long-term value appreciation and national reserve strengthening. Revising these policies would allow law enforcement agencies to hold Bitcoin in custody rather than liquidating it prematurely, aligning forfeiture practices with broader financial and security goals.

To balance Bitcoin retention with law enforcement funding needs, agencies should implement structured liquidation protocols. Instead of selling all forfeited Bitcoin immediately, a percentage of every batch should be held in reserve, while only a portion is liquidated to cover operational costs. Structured liquidation policies should also be aligned with market conditions, ensuring that Bitcoin is sold at strategic price points rather than immediately upon seizure. Proceeds from liquidated Bitcoin can be reinvested into digital asset investigations, creating a self-sustaining budget cycle for law enforcement.

Actionable steps:

Amend DOJ and Treasury protocols to authorize long-term Bitcoin retention rather than immediate liquidation.
Establish a government-managed Bitcoin custody solution to securely hold seized assets.
Implement structured liquidation policies that preserve a percentage of seized Bitcoin in reserve, while liquidating only when necessary for operational funding.
Align Bitcoin liquidation with market conditions, ensuring strategic sales instead of default post-seizure liquidation.

By integrating structured liquidation policies and updating forfeiture laws, law enforcement agencies can maximize the impact of seized Bitcoin, ensuring it serves both as a financial asset for national security and a funding source for continued digital asset investigations.

6. Strengthening victim restitution mechanisms while retaining unclaimed assets

Victim restitution is a legal priority. But many forfeited Bitcoin cases involve unclaimed assets or untraceable victims. Unclaimed assets could — and per the EO, will be — redirected to the Strategic Reserve after a legally mandated period.

Actionable steps:

Utilize blockchain intelligence tools to automate victim fund identification before general forfeiture.
Implement a national claims portal for cryptocurrency-related fraud cases, allowing victims to directly request restitution.

The Bitfinex launderers, over years, used a variety of laundering methods, including darknet markets, chain-hopping, peel chains, coinjoins, and privacy-focused coins like Monero — highlighting the evolution of money-laundering techniques within the crypto space. However, law enforcement were able to trace and, ultimately seize, USD 3.6 billion.

A proactive approach to expanding Bitcoin seizures

The US government has already seized billions in Bitcoin. But what happens next is just as critical as the seizures themselves.

By modernizing how digital assets are managed — through improved seizure protocols, smarter forfeiture policies, and enhanced blockchain intelligence — law enforcement can turn these recoveries into a long-term strategic advantage.

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