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Over $5 Billion In BTC, Why the U.S. Government Is a Bitcoin Whale
- The Government of the U.S. is one of the biggest Bitcoin whales.
- The main source is crime, but it is not straightforward for the government to claim assets.
- While a sale of U.S. Bitcoin holdings may not trigger a sell-off other recent events have.
The United States Government is one of the largest holders of Bitcoin (BTC). The Wall Street Journal reports agencies such as the Justice Department or the Internal Revenue Service have held Bitcoin in cold wallets to the tune of 200,000 Bitcoin, valued at US $5.69 billion ($8.98 billion). However, these funds have not been acquired in the traditional manner of buying on exchanges; in fact, the U.S. Government does not even see this as an investment at all.
Where Do All the Bitcoins Come From?
Most of the crypto in official U.S. custody stems from criminal activities, such as the Bitfinex hack, the Silk Road seizure, North Korea-related seizures or terror financing.
When the government seizes cryptocurrency, they don’t immediately own it. The crypto is considered evidence or proceeds of the crime. Only after a definitive seizure order is issued by the court does the government legally gain possession, sending the tokens to the US Marshals Service. This body is primarily responsible for liquidating seized assets.
The liquidation process can be lengthy. This has sometimes worked in favour of the government when the value of the cryptocurrency appreciates over the course of the legal proceedings. For instance, the Bitcoin value increased from US $600 ($944), at the time of the Bitfinex hack in 2016, to $44,000 ($69,200) when arrests were made in 2022.
Is The U.S. Government HODLing?
However, the U.S. has been slow in converting its bitcoin holdings into dollars. This isn’t due to a strategy of HODLing or waiting for higher profits. Instead, the delay is primarily because of a long legal process, not strategic intent.
Professor Nicolas Christin of Carnegie Mellon University informed the WSJ,
The government moves generally very slowly to dispose of those assets because they’ve got to do a ton of due diligence, the cases are often complicated and there’s a lot of red tape.
Professor Nicolas Christin Would A Sale Trigger BTC Price Move?
While the current 194,188 BTC seem like a lot, they are only around 1% of the current circulating market supply. It is unlikely that the U.S. selling of Bitcoin over time is making any noticeable impact on the markets.
And the government assures it does not intend to make strategic sales, as the IRS executive director for cyber and forensics services, Jarod Koopman explained, “We don’t play the market. We basically are set by the timing in our process.”
The false reports around a Spot Bitcoin ETF on the other hand have had a real impact on the market. CoinTelegraph had wrongly reported that an application by BlackRock for a Spot ETF had been approved. The price of Bitcoin jumped 10% only to drop again shortly after.
A Spot Bitcoin ETF has long been awaited and a decision is expected in Q1 of 2024.
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
