Bitcoin Is Decentralised, but Who Controls It After Confiscation?

[josscrypto]

This is the real issue. Network is decentralized, but supply is getting centralized.
After they confiscate, where it goes? US Marshals -> Coinbase Custody / Fidelity / Anchorage. Same custodians holding ETF coins.
So seized BTC from Silk Road, Bitfinex etc just adds to the pile controlled by 3 companies. Government doesn't need 51% attack. They just need to call Coinbase and show court order.
We have decentralized nodes but if 90% of users keep coins on KYC exchanges, it's not decentralized anymore. Confiscation is how they centralize it without attacking the chain.

[The Cryptovator]

In simple words, whoever has the private keys or seed phrase of the wallet will control it. It doesn’t affect the Bitcoin decentralisation anyway. If the China rules allowed Bitcoin refunds to the victim, then it would happen. But since China banned Bitcoin, I don’t think victims will get their Bitcoin back.

For my country, Bitcoin would be ended in the central bank’s custody after the court decided. At the very beginning, low-enforcement agencies would take over Bitcoin from the criminals; it would remain in their custody until the court decides about the seized Bitcoins. I am saying this based on our native rules. Because Bitcoin is also banned in my country, like China. This is the possible scenario.

[Abuobyda218]

Bitcoin is decentralized, but in some cases, even if Bitcoin is confiscated, the control system over Bitcoin will be in the hands of the country's government.
For example, the Chinese government and the United States are controlling the amount of Bitcoin that they have confiscated from fraudsters. The Chinese government itself did not purchase Bitcoin, but the Chinese government is in the second position in officially holding Bitcoin, meaning it was confiscated from fraudsters and the fraudsters could not win the case, so the government must control the Bitcoin confiscated from them. Similarly, the government of that country controls the Bitcoin confiscated in different countries. If the government can win the case while it is in control, then maybe later it can be returned to the person who had the Bitcoin personally.

[Abiky]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

Only if the Bitcoin is stored on a centralized exchange or custodial wallet. Governments simply can't confiscate non-custodial Bitcoin. The criminal would be smart enough to store his BTC on a non-custodial wallet hidden from plain sight. He'll be able to recover the coins after he completes his sentence (if caught). Depending on how long that sentence is. Because if it's a lifetime sentence, then the criminal won't be access it for good.

Even though Bitcoin is decentralized, that doesn't give you the right to do anything with it (as in doing anything "illegal"). There are rules/laws for a reason. And we must respect them. Fortunately, Bitcoin's transparent design, allows authorities to track down criminal activities on-chain. It's more of a feature than a bug to me. For the true privacy paranoid, Monero and similar coins would be the ideal choice. Abide by the laws imposed by the government, and you'll have nothing to worry about.

[Pablo-wood]

Bitcoin is decentralized, but in some cases, even if Bitcoin is confiscated, the control system over Bitcoin will be in the hands of the country's government.
For example, the Chinese government and the United States are controlling the amount of Bitcoin that they have confiscated from fraudsters. The Chinese government itself did not purchase Bitcoin, but the Chinese government is in the second position in officially holding Bitcoin, meaning it was confiscated from fraudsters and the fraudsters could not win the case, so the government must control the Bitcoin confiscated from them. Similarly, the government of that country controls the Bitcoin confiscated in different countries. If the government can win the case while it is in control, then maybe later it can be returned to the person who had the Bitcoin personally.

I think most of the confiscated bitcoins are from centralized exchanges and not from non-custodial wallet where the user has full control over. I know the chinese government and the US can trace transactions down to exchanges and uncover hidden behind wallets they intend to confiscate but as a bitcoin hodler who uses new wallet address for every transaction it might make tracking more difficult especially if we try our very best to avoid CEX. Its hard to recover confiscated bitcoins. In most case government use those funds for national projects or reserves.

[lombok]

I think most of the confiscated bitcoins are from centralized exchanges and not from non-custodial wallet where the user has full control over. I know the chinese government and the US can trace transactions down to exchanges and uncover hidden behind wallets they intend to confiscate but as a bitcoin hodler who uses new wallet address for every transaction it might make tracking more difficult especially if we try our very best to avoid CEX. Its hard to recover confiscated bitcoins. In most case government use those funds for national projects or reserves.

The reason why non-custodial wallets are more secure compared to any third party custodial system in storing any of your digital assets is simply due to their ability to ensure your privacy. Any of the major governments have some advanced tracking systems which would allow them to trace transactions through various networks, however, generating a new wallet every time you perform the transaction will add extra privacy, which will make blockchain tracing much more difficult. There are several vulnerabilities when you use a custody system because there is a direct link between the wallet balance and the identity of the user. In case they manage to seize these assets, these assets go straight into their treasury to fund their programs.