Analysis: The U.S. has seized nearly 200,000 bitcoins to date, global confiscations are up to 453,000

Bitcoin’s most important value proposition is arguably censorship resistance. Put simply, if the best practices are followed, nobody can freeze or seize your bitcoin holdings. Anyone who owns the private key is the holder of the bitcoins. If the private key is either encrypted or simply memorized, no authority can get to the associated bitcoin. And yet it happens and has happened quite often; usually because criminals don’t use best practices. According to The Block’s findings, the total amount of seized bitcoins is now 1 out of every 40 — 2.6% of the circulating supply.

Last week, there was a widely circulated quote on social media from a recent News Journal article that said that “many bitcoin analysts believe the U.S. government today controls more bitcoins than anyone else in the world.” It turns out that the source of that claim was a Wired article from December 2013.

At that time, the U.S. government actually controlled roughly 174,000 bitcoins. Those were seized from Ross Ulbricht who ran Silk Road, a popular online drug marketplace at the time. The seized bitcoins then represented 1.5% of the total in circulation (keep in mind the total amount of bitcoin out there grows through mining, until the cap of 21 million is reached decades from now). But that was five years ago and a lot of things have changed since then.

For one, the U.S. government definitely doesn’t control more bitcoins than anyone else in the world. The first smaller portion of the seized Silk Road funds was notably auctioned off in June 2014 to the well-known venture capitalist and crypto enthusiast Tim Draper. The second larger portion was eventually auctioned off for $48.2 million in September 2017.

The U.S. government still owns some bitcoin but nowhere close to the amounts it once used to control. According to The Block’s estimates, the U.S. government currently owns at least 4,100 BTC and likely not more than 10,000 BTC. The United States has seized approximately 198,000 bitcoins from at least 100 different federal criminal, civil and administrative cases. It sold 98% of these bitcoins for $151 million, which means that, on average, it sold each bitcoin for a price of $780. (Editor’s note: Perhaps they should have HODLed?)

The largest confiscation of bitcoin is still surrounded by mystery and controversy. On May 19, 2017, the Southeast European Law Enforcement Centre (SELEC) released a press release titled “More than 200,000 bitcoins in value of 500 million USD found by the Bulgarian authorities.” The release said: “It was determined that the members of the organized crime group invested the money obtained from these illegal activities in bitcoins, around 200,000 being discovered in the virtual space.”

In December, the head of Bulgaria’s Special Prosecutor’s Office, Ivan Geshev, said that “no bitcoins had been seized.” It is possible that SELEC never actually had access to the private keys. Or it is also possible that there was corruption involved. At the very least, SELEC should have released the addresses so they could be transparently tracked.

If we include SELEC in the list of seizures, the total amount of seized bitcoins is now nearly 453,000 or about 2.6% of the total circulating supply. But it’s also worth noting that 85.6% of that amount is coming from just two cases: Silk Road and SELEC (see table below).

Seizures of a censorship resistant bitcoin are surprisingly common but as even criminals start to to follow best practices, the seized amounts will gradually decrease and will likely be negligible in the long run.

The table below shows all the publicly available seizures and auctions of bitcoins larger than $500,000 that The Block was able to find. 

The post Analysis: The U.S. has seized nearly 200,000 bitcoins to date, global confiscations are up to 453,000 appeared first on The Block.

Analysis: The U.S. has seized nearly 200,000 bitcoins to date, global confiscations are up to 453,000 written by Larry Cermak @ November 7, 2018 Larry Cermak

Comments are closed.