How Does the Government Acquire Bitcoin?
The government may buy bitcoin as a reserve asset or acquire bitcoin by taking it from citizens as legal consequence for criminal activity. Most often, governments obtain bitcoin through government agency seizures where the defendant in question was alleged to have either facilitated a criminal activity with the bitcoin, or accepted bitcoin as proceeds for rendering a criminal service.
How Much Bitcoin Does the U.S. Government Have?
The United States government, Bulgarian government, and several other governments possess large caches of bitcoin. However, the U.S. government offers little public commentary on the status of its bitcoin holdings, seizures, and plans for liquidation. Most warrants to seize bitcoin are accompanied by a sealing order, which prevents the party served from disclosing the warrant’s existence to the public. Nondisclosure of the warrant’s existence makes it more difficult to know exactly how much bitcoin the government has. For example, when the FBI filed a warrant to seize bitcoin that was stolen by the Colonial Pipeline hackers, they already possessed the private key controlling that bitcoin. However, the FBI has not commented on how they obtained the private key before the seizure warrant was approved by a judge.
The U.S. Federal Bureau of Investigation (FBI) obtained approximately 144,000 bitcoin seized from the Silk Road in October of 2013. Allegedly, an independent computer specialist, known in legal documentation as Individual X, had hacked into the Silk Road’s payment system and stolen bitcoin from the darknet marketplace. Soon thereafter, the FBI solicited Individual X into retrieving 70,000 bitcoin from the Silk Road. The total cache of seized bitcoin is reported to be approximately 175,000 bitcoin.
➤ Learn more about how the U.S. Government can seize bitcoin.
Typically, The U.S. Department of Justice reports administrative, civil, and criminal forfeiture actions on a dedicated website. However, the department’s infrequent updates to the website renders the service ineffective for determining how much bitcoin the government holds presently.
The Federal Bureau of Investigation, Internal Revenue Service, U.S. Attorney’s Office, and the U.S. The Secret Service possesses bitcoin that has been seized from defendants as a result of suspected criminal activity. None of these agencies have the authority to auction or sell the assets seized; that is a duty of the U.S. Marshals Service. Overall, it is difficult to determine how much bitcoin the government holds at any given time.
➤ Learn more about seizure and forfeiture actions.
What Does the Government Do With Bitcoin?
Governments are generally private about the amount of bitcoin they possess and what they plan to do with it. Bitcoin’s price volatility makes it difficult to predict the most profitable time for a sale, which has led some governments to custody bitcoin for some time rather than selling it immediately.
When the government wishes to sell bitcoin, the U.S. Marshals Service will host a bitcoin auction. Bidders must place a $200,000 deposit to participate. Reports estimate that the U.S. Marshals Service has sold at least 185,230 bitcoin for approximately $150 million.
➤ Learn more about Bitcoin auctioned by the U.S. Marshals Service.
Notice: River does not provide investment, financial, tax, or legal advice. The information provided is general and illustrative in nature and therefore is not intended to provide, and should not be relied on for, tax advice. We encourage you to consult the appropriate tax professional to understand your personal tax circ*mstances.
Key Takeaways
- The total amount of bitcoin held by the government at any given time is difficult to calculate, because many different agencies seize bitcoin under sealed warrants.
- The U.S. Government has seized bitcoin that was allegedly linked to financial crimes or terrorist financing.
- The U.S. Marshals Service auctions seized bitcoin.
