The proposed revision would expand HMRC’s current powers to access bank accounts, allowing the agency to confiscate digital assets from custodial wallets and PayPal accounts. The plans come as digital asset payments are increasingly normalized, and as cryptocurrencies are set to be included in individual tax returns.

HMRC aims to consult with digital wallet operators to evaluate the feasibility of the proposal and address potential implementation challenges. The tax authority has demonstrated responsible use of its current DRD powers, easing concerns about potential overreach with digital wallet privileges.

In the last tax season, HMRC collected £787 billion and expects the inclusion of cryptocurrencies in individual returns to generate an additional $12 million (£9.5m) in capital gains collection, BeInCrypto reports.

Existing legislation empowers law enforcement agencies like the London Metropolitan Police to seize crypto linked to criminal activities. Meanwhile, the US Internal Revenue Service (IRS) is deploying agents to assist international law enforcement in tackling tax and financial crimes involving cryptocurrencies.