The US government has accumulated $5 billion worth of Bitcoins and everything has been confiscated

The US government is one of the world’s largest owners of Bitcoins, but is not interested in the price of the main cryptocurrency – these assets have been confiscated from cybercriminals and owners of illegal trading platforms on the dark web, he writes Wall Street Journal. Funds are stored offline in hardware wallets and controlled by the Department of Justice, the Internal Revenue Service and other authorities.

The fate of bitcoins held by the US federal government is of particular interest to crypto traders as the sale of these assets could shake up the cryptocurrency market. In fact, these funds are very slow to convert into US dollars, and the reason for this is not a specific investment strategy, but simply a byproduct of a lengthy legal process.

In the last three withdrawals alone, the US treasury was replenished with more than 200,000 Bitcoins, according to public data – that’s more than $5 billion, and in total it could be much more. The legal process from the confiscation of illegally acquired cryptocurrencies to the decision to convert them into fiat funds, i.e. dollars, can take years. In some cases, this procedure worked in the government’s favor as the cryptocurrency price rose. When Bitfinex was hacked in 2016, Bitcoin was worth $600. In 2022, suspects in this case were arrested, of which about 95,000 bitcoins were seized, and one digital coin cost $44,000 at the time. Today, Bitcoin is trading for around $28,000.

When a government agency takes control of a crypto asset, it does not immediately become US property. The court issues a confiscation order, the government takes ownership and transfers the asset to the US Marshals Service, which then liquidates it and converts it into fiat money. While the case is pending, the Bitcoins will be held as evidence. The Ministry of Justice is still storing the Bitcoins confiscated in the case of the Silk Road trading platform in hardware wallets: In particular, these are 69,000 Bitcoins from platform founder Ross Ulbricht.

The US government’s cryptocurrency sales process has evolved along with the industry: initially, the US Marshals Service conducted auctions that sold digital assets directly to interested parties. And only in January 2021, the department decided to use the services of crypto exchanges – assets are sold in several batches to prevent large sales from affecting the market. Proceeds from such proceedings sometimes go towards compensating those injured: in July this year, Bitfinex reported receiving $300,000 in fiat funds and 6,917 coins of the Bitcoin Cash cryptocurrency, which at that time was worth $1,900 had. Government agencies may also request support for associated costs, such as software licenses to track cryptocurrency movements.

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