Controversial Bill Seeks to Grant Police Power to Freeze Assets in Electronic Fraud Cases
A new bill in Brazil is sparking debate over its potential impact on due process and the treatment of virtual assets. Senator Fabiano Contarato has proposed PL 3.279/25, which would amend the Criminal Procedure Code to allow police chiefs to immediately freeze assets in cases of electronic fraud and financial application fraud.
The Senator’s Rationale
Senator Contarato argues the bill addresses a “procedural gap” that hinders the prosecution of digital financial crimes. He believes the current requirement for judicial approval before freezing assets allows criminals to quickly move funds, convert them into cryptocurrencies, or transfer them abroad.
Under the proposed law, if there is reasonable evidence of a crime and fraudulent movement of funds, the police chief could order an immediate freeze, subject to later judicial review.
Concerns Over Fundamental Rights
Critics argue the bill raises serious concerns about fundamental rights and due process. They say it could undermine principles of the accusatorial criminal process, such as the right to a neutral judge and the requirement for judicial authorization of restrictive measures.
Virtual Assets Under Scrutiny
The bill also draws attention to how virtual assets are portrayed as central to criminal activity. The legislation specifically targets cases involving the conversion of funds into virtual assets or their transfer abroad, which some see as a selective and technologically biased approach.
This approach reinforces a negative view of virtual assets, presenting them as tools for hiding wealth or evading currency controls. While virtual assets, like any financial instrument, can be used for illicit purposes, critics argue it’s unfair to demonize them or automatically associate them with crime.
Understanding the Technology
The perceived “procedural gap” may stem from a lack of understanding of how virtual asset technology works. Public blockchains like Bitcoin, Ethereum, and Tron offer transparent, permanent, and traceable records, often with greater precision than traditional banking systems.
Difficulties in blocking assets often arise from the nature of the platforms involved. Decentralized exchanges don’t hold custody of assets, making direct freezes impossible. Brazilian centralized exchanges are already regulated and cooperate with authorities. For foreign exchanges, international legal cooperation is the appropriate channel.
In cases of self-custody, blocking assets is technically impossible because the user has exclusive control through a private key. The user is not legally obligated to reveal this key, as it would violate the right against self-incrimination.
Investing in Expertise
Instead of resorting to legislation that presumes the illegitimacy of virtual assets, the government should invest in training public officials and developing investigative guidelines that are compatible with the technology. This includes understanding the different types of virtual assets, such as cryptocurrencies and tokens, and their legitimate uses.
On-chain analysis, using public and private forensic tools, should be recognized as a legitimate investigative tool, particularly in defensive investigations, as regulated by the Brazilian Bar Association.
A Call for Technical Expertise and Dialogue
While improving the prosecution of cybercrimes is a valid goal, it should not come at the expense of constitutional guarantees or through simplistic solutions based on technological stigmas.
Creating a regulatory environment that is compatible with virtual assets requires technical expertise, precise definitions, and open dialogue with professionals in the field.
Proposed Amendment: Article 244-A of the Criminal Procedure Code
The proposed amendment outlines the conditions under which a police chief can order an immediate freeze of assets in cases of electronic fraud and financial application fraud. It includes requirements for written justification, notification to the judiciary, and judicial review of the measure.
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