Does the US government have more than 200,000 Bitcoin?

The recent rise in Bitcoin prices, in the wake of global banking pressures and the collapse of some intermediary lenders, has renewed interest in cryptocurrencies. There has even been speculation from analysts at Standard Chartered that the price of Bitcoin could rise to $100,000 by the end of 2024.

The decentralized cryptocurrency, whose value was punctured by a series of scandals on major crypto platforms such as FTX, has seen its price rise to around $30,000 in April from a low of nearly $13,000 in November 2022.

Among the speculation that helped fuel the rally was a post on social media suggesting that the US government is one of the largest holders of Bitcoin in the world.

The requirement

A Reddit post, published on March 26, 2023, that received more than 2,000 upvotes claimed that “The US government holds 205,515 bitcoins more than 1% of the circulating supply.”

The facts

The US government’s approach to cryptocurrency has been complicated, to say the least, which makes the notion that it owns such a large amount of Bitcoin surprising.

Despite Democrats, and some Republicans, receiving millions in donations from FTX founder Samuel Bankman-Fried, the White House wrote a letter earlier this year documenting financial risks associated with cryptocurrency.

“Legislation should not give the green light for mainstream institutions, such as pension funds, to dive headlong into cryptocurrency markets,” the letter said.

“Over the past year, traditional financial institutions’ limited exposure to cryptocurrency has prevented cryptocurrency turmoil from infecting the broader financial system.

“It would be a serious mistake to pass legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.”

Nevertheless, despite skepticism both among politicians and certain sections of the public, Bitcoin’s revival suggests that there is still value in the digital asset.

So, could the US government be a Bitcoin whale, despite its measures to limit the use of the currency?

As the Reddit post explains, the majority of these holdings come from seizures, some of which have been made public by authorities.

The post mentions three seizures, two of which were made last year.

In February 2022, the Department of Justice announced that it had seized 94,636 Bitcoin from a hack of Bitfinex cryptocurrency exchange Bitfinex.

Ilya Lichtenstein and his wife Heather Morgan, then 34 and 31 respectively, were charged with conspiracy to commit money laundering. Although the pair were reported to be considering a plea deal following their arrest, the DOJ has not made any further announcements on the matter. Newsweek has contacted the ministry for comment.

Agents were able to recover more than 94,000 Bitcoin that had been stolen.

Then, in November 2022, the United States Attorney’s Office for the Southern District of New York announced a $3.3 billion cryptocurrency seizure from James Zhong, a fraudster who had illegally obtained over 50,000 Bitcoins from the Silk Road dark web market. Zhong, 32, of Gainesville, Georgia, and Athens, Georgia, pleaded guilty to one count of wire fraud. He was sentenced to one year and one day in prison by a judge in New York.

The total seizure came to about 51,351 Bitcoins, worth more than $3.3 billion, making it the largest cryptocurrency seizure in US history.

The Reddit post also mentions a case from 2020, when the US Attorney’s Office, Northern District of California, seized 69,370 Bitcoins from a hacker known only as “Individual X” who had stolen the assets from Silk Road.

Bringing these three cases together would bring the total number of US Bitcoin seizures to more than 200,000, as the Reddit post details.

But in the past few months alone, the US government was reported to have transferred $1 billion of Bitcoin from wallets linked to the seizures to new addresses on the cryptocurrency exchange Coinbase.

According to research firm PeckShieldAlert, three transfers totaling more than 50,000 Bitcoin were made from wallets of US law enforcement agencies.

This will make a significant dent in the total shared on Reddit. However, it is unlikely to be the only wallet that the US government has control over.

We also know that the US government has sold other, much smaller Bitcoin holdings from a variety of cases. For example, in 2020 it announced the auction of 4,040 Bitcoin through the US Marshalls Service, which handles the seizure of assets.

An audit of the management of the seized cryptocurrency from 2017-2022 also mentioned a handful of seizures, although not enough to make any firm claim as to whether the government still has 200,000 Bitcoin or more.

Anchorage Digital, an asset platform, was made the custodian for Marshals Service cryptocurrency seizures in 2021. Neither Anchorage nor the Marshals Service responded to emails Newsweek sent asking for comment on the size of US seized assets.

So questions still remain: how much does the government have and how is it recorded?

To find out more, Newsweek spoke to Professor Gavin Brown, a Senior Lecturer in Financial Technology at the University of Liverpool.

Brown said that without tracking each crypto seizure and subsequent auction, there was no central archive or database available from which he could find which listed holdings.

“I did some research on it and thought we might be able to get something done. But the only real things that hit the headlines are the seizures, the auctions that regularly take place and – obviously with the benefit of hindsight – whether those auctions were successful.

“I guess it wouldn’t be beyond human wit to go and try to figure it out, to follow every auction and follow every seizure that’s been announced to get a ballpark figure, but I don’t know of a central, simple place that stores this information.

“The benefit to the company when they hold Bitcoin is that it’s on their balance sheet. You can check their 10-K or 10-Q they have to file with the SEC, whereas… I haven’t seen a central, clean place where you can say that’s your number.”

Part of this secrecy may be strategic. If, for example, the US were to hold onto its cryptocurrency seizures (in the context that price volatility could make them more valuable) this act of holding the assets (which might make sense) could be seen as a tacit endorsement of cryptocurrency at large, as Brown explained .

“The government, normally, when they seize loot in one way or another, their job is to get rid of it quickly and maintain a fair or reasonable price,” he said.

“But when they’re holding things like Bitcoin, the price is incredibly volatile. So they have a lot, sort of friction, in the sense that they’re holding Bitcoin for the price to go up to speculate, and go up and make more money from it, or sell they now, but potentially miss out on future gains?”

Brown highlighted how in 2014 the US Marshalls Service sold 29,656 Bitcoin to investor Tim Draper.

At the time, Bitcoin was trading at around $630, making the value of Draper’s investment more than $18 million. Today it would be worth nearly $890 million. Sold at Bitcoin’s all-time high of around $68,000 in November 2021, the figure would be more than $2 billion.

“So technically, you know, the American taxpayers were just missing out because their government was selling Bitcoin cheap,” Brown added.

“But by the same token, if you’ll excuse the pun, if they’re holding Bitcoin to try to get more value for it, the signal that sends to society and the economy at large is that the government’s long-awaited Bitcoin, they love it.

“You know in the same way that I can invest in it to make money, the government does the same, so they’re really between a rock and a hard place to dump too early and or maybe hold on, but then be criticized for almost double talk.

“You know, criticizing Bitcoin in one breath, but trying to monetize it in the other.”

However, the government may manage its Bitcoin seizures, but there is simply not enough clear data to say for sure whether the seized holdings may have reached 205,000.

The recent boom in the value of Bitcoin has been attributed to the collapse of Silicon Valley Bank and Signature Bank, triggering the biggest US banking crisis since 2008.

Investor and entrepreneur Anthony Pompliano said in a tweet last month: “Very clear signal from the market that a decentralized currency that allows you to be your own bank is valued in light of recent developments.”

The verdict

Need context.

Seizure records show that the US government has held around 200,000 Bitcoin. These are only among the large seizures, related to fraud and other criminal activities related to cryptocurrency.

It has also sold a significant portion of its holdings, and since it does not have a centralized, public resource that provides an itemized list of all the cryptocurrency it holds, which may well be a deliberate political strategy, we cannot say for sure. the total amount it may or may not contain.

FACT CHECKING BY Newsweek’s Fact Check team