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Bitcoin: These Governments Hold Billions of Dollars in BTC
Aug. 15, 2024. 7 mins. read.
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Governments are quietly amassing Bitcoin reserves, transforming the crypto landscape as their influence grows, with potential ripple effects on global markets and the future of digital assets.
New crypto poster boy Donald Trump made waves at the recent Bitcoin Nashville 2024 conference where he and other politicians unveiled plans to create a governmental ‘Bitcoin reserve’ of sorts. This bullish news came in the wake of a tough July for BTC where Germany sold off $3 billion of dollars in seized Bitcoin, pushing its price down significantly to the low $50,000s.
While Bitcoin started as a libertarian ideal which was supposed to help free Joe Public from the financial control of evil governments and their central banks, 15 years later it is clear that idealism doesn’t survive reality unharmed.
The US government now holds a staggering 200,000, and it’s not the only country to have a big bag of Bitcoin for a rainy day. Other governments around the world have found themselves in possession of significant amounts of Bitcoin (BTC) and other cryptocurrencies, which they are HODLing for whatever reason they deem fit.
These holdings are often the result of seizures from criminal activities rather than intentional investments, but that makes no difference in the end. The growing stockpile of digital assets under state control has consequences that must be considered.
Let’s look at Bitcoin holdings of several major governments, how they acquired these assets, and the potential implications for the crypto market.
United States: The Largest Government Holder of Bitcoin
According to data from blockchain analytics firm Arkham, the US government holds over 213,000 BTC, along with various other cryptocurrencies, bringing its total crypto holdings to approximately $4 billion. This makes it the largest holder of bitcoin among governments globally, accounting for about 1% of the total bitcoin supply of 21 million.
Interestingly, the US government has never directly purchased Bitcoin. Instead, its holdings are the result of seizures from illegal activities, particularly from the Silk Road marketplace, which was shut down by the FBI in 2013. The U.S. government has auctioned off a significant portion of its seized bitcoins, having sold around 195,000 bitcoins, generating approximately $366 million from these sales.
Some other notable cases include:
- The ‘Individual X’ case: An anonymous hacker stole over 69,000 BTC from the Silk Road darknet marketplace between 2012 and 2013. The hacker was apprehended in 2015 and forced to forfeit the stolen funds, going straight to the vaults of Uncle Sam.
- James Zhong’s Silk Road exploit: Zhong managed to steal more than 51,000 BTC from Silk Road using a technical exploit, which many don’t consider to be really criminal. He was caught in November 2021 after a decade on the run, which was covered in this fascinating documentary episode.
- The Bitfinex hack: In February 2022, authorities arrested Ilya Lichtenstein and his wife, Heather ‘RazzleKhan’ Morgan, for allegedly laundering almost 120,000 BTC stolen in the 2016 Bitfinex hack.
The US government typically keeps seized crypto assets in cold storage during ongoing investigations. Once cases are resolved, these assets are often converted to fiat currency through exchanges or OTC auctions. Between 2014 and 2023, the US government sold over $360 million worth of BTC across 11 different auctions.
However, if Trump gets elected, he has promised that the US government will, “Never sell your Bitcoin”.
China Plays Both Sides
Despite its bipolar attitude and well-known crackdown on cryptocurrency trading and mining, the Chinese government has also found itself in possession of a substantial amount of Bitcoin. In 2020, Chinese authorities seized over 190,000 BTC, along with other cryptocurrencies, from the Plus Token scam project. This massive haul was valued at billions of dollars at the time.
While it’s unclear if China still holds all of these assets, the government stated its intention to process the seized digital currencies “pursuant to laws” and forfeit the proceeds to the national treasury. This suggests that much of the confiscated crypto may have already been exchanged for fiat currency.
Interestingly, despite the ban on crypto mining in China, there have been speculations about state-owned mining operations. In October 2023, reports emerged of a Bitcoin mining operation called Bit Origin, which could be traced back to the Chinese government, raising questions about China’s true stance on cryptocurrency.
United Kingdom Nabs 61,000 BTC from Criminal Activities
The United Kingdom has also amassed a significant Bitcoin holding through law enforcement actions. In one high-profile case, London’s Metropolitan Police seized over 61,000 BTC from a female UK citizen named Jian Wen, who was found guilty of laundering funds from an investment fraud operation in China.
The UK government has been actively seizing cryptocurrencies used in criminal activities. In June and July 2021, the Metropolitan Police confiscated around £180 million worth of crypto assets as part of a money laundering investigation, setting new records for the largest crypto seizures in the country.
A new law that came into effect in April 2024 has given UK law enforcement agencies more power to seize, freeze, and destroy cryptocurrency used by criminals. This legislation is likely to cause even more crypto assets to come under government control in the future.
Ukraine Mixes Government and Official Holdings
Ukraine presents an interesting case in the realm of government Bitcoin holdings. The country has received significant crypto donations to support its war effort, with estimates suggesting over $225 million raised by July 2023. But it’s the holdings of government officials that truly stand out.
In April 2021, a Ukrainian government data report revealed that public officials owned over 46,000 BTC, worth $2.67 billion at the time. Out of 700,000 officials who made property declarations, 652 declared Bitcoin ownership, with an average holding of 71 BTC each. Some officials reported owning over 5,000 BTC, with one claiming ownership of 18,000 BTC – worth over $1.1 billion at current prices.
El Salvador Continues to Accumulate
And of course, this article would be remiss to not mention El Salvador. Under its leader Nayib Bukele, the country became the first to adopt bitcoin as legal tender in September 2021 to much fanfare at the Bitcoin Miami conference. El Salvador was mocked at first for its meager holdings and took even more flak during the 2022 bear market, but with Bitcoin’s dramatic reversal of fortune in 2023, its investment has come up roses ever since.
El Salvador currently holds approximately 5,770 bitcoins, valued at around $340 million as of August 2024. This makes it one of the largest government holders of bitcoin globally.
Potential Market Impact and Future Outlook
These big Bitcoin holdings by governments raise a question: what impact can this have on the crypto market? Some come from seizures, some from intentional investments, but either represent a substantial amount of Bitcoin that could potentially enter the market.
Government sales of Bitcoin, such as the recent German government sell-off, give Supply a shot-in-the-arm in its neverending armwrestle against Demand, pushing prices downwards. Such sales also have an indirect effect: generating uncertainty among investors who are worried about the downward pressure of a sudden big sell-off.
Looking ahead, there are several factors that could further influence government attitudes towards Bitcoin:
- Regulatory developments: As crypto regulations get more cohesive worldwide, governments may gain more clarity on how to handle their holdings.
- Reserve currency potential: Some crypto pundits love to speculate that governments could eventually view Bitcoin as a potential reserve currency, especially given recent recommendations of allowing central banks to hold up to 2% of their reserves in crypto starting January 1, 2025.
- Political shifts: Changes in government leadership, such as the potential return of a crypto-friendly administration in the United States under Trump, could lead to more positive policies towards the crypto industry.
- Mining operations: Governments might opt to mine Bitcoin rather than buy it, potentially following China’s alleged model of state-owned mining operations. This will require extensive resources though, and with the recent Halving making it more expensive to mine the currency, it could be tough to get approved.
Conclusion
The world’s governments becoming significant Bitcoin holders still isn’t standard practice. But government Bitcoin holdings – even if primarily through seizures – is a growing trend, and an intriguing development in the cryptocurrency landscape.
Add to this the slow but steady accumulation of BTC through a number of spot ETFs led by TradFi giants like BlackRock, and it’s clear that Bitcoin is really starting to reach its ‘digital gold’ end-state. What these governments and Wall Street giants do with their holdings, and the power this gives them over the world’s premier digital asset, remains to be seen.
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