US Government Bitcoin Ownership: Acquisition, Handling, and Impact Explained

Salomon Kisters

Jun 6, 2023

This post may contain affiliate links. If you use these links to buy something we may earn a commission. Thanks!

Over the last few years, Bitcoin has been on a rollercoaster ride, attaining both success and criticism alike. The United States government, too, has had a significant role to play in Bitcoin’s journey. The US government has suddenly become one of the largest Bitcoin whales in the market, acquiring a substantial amount of the cryptocurrency by seizing illegally obtained funds.

As of now, it is estimated that the government owns a considerable amount of Bitcoin in the US, which it seized from various criminal or illicit activities. The question that arises here is: what will the government do with these funds in the long run?

According to experts, the US government will likely seek to liquidate these funds through private auctions. This would enable the authorities to dispose of the Bitcoin in a secure and controlled environment and also benefit from the profits generated through the auction process.

The US government’s move to seize such funds reflects its firm stance against illegal activities and its commitment to curbing financial crime in the economy. It also highlights the growing importance of cryptocurrencies in today’s world and their impact on various facets of our lives.

As we move towards an increasingly digitized world, the role of cryptocurrencies like Bitcoin is only set to increase, and governments worldwide will be keeping a close watch on their consumption, trade, and overall economic impact.

How Does a Government Obtain Bitcoin?

As we already know, Bitcoin has emerged as one of the most popular alternative investments to fiat currency and traditional financial systems, attracting both retail and institutional investors to its fold. However, it’s not just individuals and corporations that are interested in purchasing Bitcoin. Governments around the world are also monitoring and regulating the demand and supply of cryptocurrency.

In fact, some governments have already taken steps to acquire Bitcoin as a reserve asset or through legal seizures from criminal activity.

Bitcoin’s decentralized nature and lack of regulation have made it popular among criminals who engage in illicit activities like money laundering, drug trafficking, and ransomware attacks. Authorities have taken notice and are using various means to seize this digital currency from criminals. These actions not only help to combat criminal activity but also provide governments with a way to acquire Bitcoin without having to buy it on the open market.

Aside from acquiring Bitcoin through legal seizures, some governments have also purchased the cryptocurrency as a reserve asset. This move is seen as a way to diversify away from traditional assets like gold and bonds. However, investing in Bitcoin is not without some risk, as the cryptocurrency is highly volatile and subject to drastic price swings.

Despite these risks, many governments are still considering the acquisition of Bitcoin, either through seizure or purchase, as a way to diversify their asset holdings. It remains to be seen whether Bitcoin will become a more common asset in government reserves, but for now, it’s clear that this cryptocurrency is on the radar of many policymakers.

How Much Bitcoin Does the US Government Own?

As per the latest reports, the US government currently holds a staggering 205,515 Bitcoins, which is estimated to be valued at an incredible $5.66 billion based on today’s exchange rates. These Bitcoins have been confiscated in three different cases, including the infamous Silk Road Bitcoin Seizure in November 2020, the 2022 Bitfinex Hack confiscation, and the seizure of Bitcoins from James Zhong last year.

The huge number of Bitcoins seized in all these cases has been a hot topic of discussion among crypto enthusiasts worldwide. Out of the total Bitcoins held by the US government, 69,369 BTC were seized from an individual known as “Individual X”. A whopping 94,643 BTC were taken from Ilya Lichtenstein and his wife, Heather Morgan, while 51,326 BTC were seized from James Zhong in November 2022.

According to the report from Glassnode, the world of Bitcoin has witnessed a significant movement of cryptocurrency. The report, published on March 9, 2023, stated that the total number of Bitcoins has reduced from 215,338 to 205,515 BTC. This reduction can be attributed to the movement of approximately 40,000 Bitcoins from wallets associated with the US Government law enforcement seizures. As per the report, “The majority of these appear to be internal transfers (so far). However, around 9,861 [Bitcoin] seized from the Silk Road hacker have been sent to our Coinbase cluster.”

The current estimate of 205,515 Bitcoins comes from the Dune Analytics set of metrics which has been compiled by 21Shares, an exchange-traded product provider. The report sheds light on the crypto addresses and transaction history of the US government, revealing that a significant portion of the seized BTC came from the Bitfinex forfeiture, accounting for 44% of the total cache.

Another 32.2% came from a mysterious figure known only as “Individual X”, while the remaining 23.8% were seized in the Zhong case.

It is important to note that these figures may not be a complete representation of the total number of Bitcoins seized by the US government to this day. According to the report, there is a possibility that the government may possess more Bitcoins than what is currently tallied up in the 21Shares’ data set.

However, one thing is clear, that the current estimate of 205,515 BTC is a “lower-bound estimation” based solely on “publicly available information”. Given the volatile nature of Bitcoin, it will be interesting to see how the US government chooses to handle its growing collection of seized cryptocurrencies.

Concern for Bitcoin Holders

When it comes to disposing of Bitcoin holdings, the US government has designated methods that ensure transparency and accountability in the process. Usually, the responsibility of liquidating Bitcoin holdings falls upon the US Marshals Service which conducts public auctions.

One such instance is when prominent Venture Capitalist Tim Draper made headlines for purchasing 30,000 BTC from the government for approximately $18.5 million, which amounted to roughly $616 per coin. It is highly probable that the Bitcoin seized by the US Department of Justice (DOJ) will be made available to the public in a similar fashion, maintaining the integrity of the whole disposal process.

The Department of Justice (DOJ) has become increasingly calculated in its approach to selling off seized cryptocurrencies, often timing auctions to maximize profits. One notable example of this occurred in November 2021 when the DOJ liquidated $56 million worth of cryptocurrencies seized from a BitConnect promoter at the height of the bull market. This move proved to be a wise one, as the assets were sold for their highest possible value, benefitting the DOJ and taxpayers alike.

However, the question remains whether the DOJ will display similar patience when it comes to selling its stash of Bitcoins. The volatile nature of the cryptocurrency market is not a secret, and Bitcoin, in particular, has been known to experience dramatic fluctuations in value.

Given that the DOJ has already shown a willingness to hold on to the proceeds from the Individual X and Razzlekhan confiscations, it is possible that the agency may wait for Bitcoin to rise in value again before selling its holdings.

As a professional institution, the DOJ is well aware of the importance of making sound financial decisions. It is likely that the agency will consider various factors, including market conditions, before deciding when to sell its Bitcoins. Regardless of when the company decides to liquidate its holdings, one thing is certain: the DOJ will remain vigilant in its efforts to secure the highest possible value for the seized assets.

How Many Bitcoins Do American Citizens Own?

According to recent data from a survey commissioned by the financial website Finder, 59 million Americans own some form of digital asset. Amongst these digital assets, Bitcoin is the most popular choice among investors. As per a Harris Poll report published by USA Today in August 2021, it was discovered that 13% of Americans believe in the potential of Bitcoin as the future of finance.

This demonstrates the growing interest in cryptocurrencies and how they are becoming a mainstream investment option for many people. Despite the volatility associated with Bitcoin, investors are drawn to its potential for high returns and as a hedge against inflation. As the world of cryptocurrencies continues to evolve, it will be interesting to see how Bitcoin and other digital assets continue to shape the financial landscape.

Takeaway

The United States government’s involvement in the digital currency market has been on the rise over the past few years. According to recent reports, the government has grown its Bitcoin holdings to about 1% of the total supply. This means that the US government currently holds an impressive 205,000 BitcoinS, which is worth $5.75 billion.

This marks a significant increase in the government’s Bitcoin holdings since 2013, making it one of the largest holders of this digital asset in the wor

Stay informed with the latest insights in Crypto, Blockchain, and Cyber-Security! Subscribe to our newsletter now to receive exclusive updates, expert analyses, and current developments directly to your inbox. Don't miss the opportunity to expand your knowledge and stay up-to-date.

Please note that the Content may have been generated with the Help of AI. The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.