The U.S. government has been seizing large amounts of Bitcoin (BTC) as cryptocurrency becomes more popular. However, most of the Bitcoin seized has been from crime. So, after all of these years, how much Bitcoin does the government own currently?
In 2021, crypto crime reached the highest it has ever been. According to Fortune, criminals made $14 billion in crypto crime in 2021, which was a 79% increase. However, the rate of crypto crime decreased from 0.62 percent in 2020 to 0.15 percent in 2021.
The U.S. government seizes most of its Bitcoin from crime.
The government has a track record of seizing Bitcoin. In 2020, the U.S. government seized over $1 billion worth of Bitcoin that was connected to the online marketplace known as "Silk Road." According to NBC News, the Silk Road marketplace functioned on the dark web where people buy illicit items with Bitcoin. When the cryptocurrency was seized, it was worth $1 billion but it was worth $3 billion by 2021.
The IRS said that the Bitcoin would be auctioned off and the proceeds would be put into either the Treasury Forfeiture Fund or the Department of Justice Assets Forfeiture Fund. As of 2022, the government has seized another large amount of bitcoin worth $3.6 billion. A couple by the name of Heather Morgan and Ilya Lichtenstein was arrested on the charge of conspiring to launder stolen Bitcoin.
The couple faces charges of conspiracy to commit money laundering and conspiracy to defraud the U.S. The charges amount to a maximum sentence of 25 years. Although the government seized the funds, it aims to return them to the people it was stolen from. According to Bitfinex, it will “work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin.”
The heist consisted of 119,754 Bitcoin, which was valued at $5 billion and was reportedly stolen from the Bitfinex platform. According to Forbes, Deputy Attorney General Lisa Monaco said that this seizure was the largest ever. When the investigation started, the Department of Justice combed through the couple’s accounts and gained access to one of their digital wallets. The wallet contained 94,000 Bitcoin, which totaled about $3.6 billion.
How much BTC does the U.S. government own?
Crypto analysis pages have claimed that the U.S. government holds 1 percent of the entire Bitcoin supply. Although the U.S. government auctions off Bitcoin, it has been claimed that the government still holds $4.08 billion in Bitcoin. The government is third in Bitcoin holdings behind Grayscale Bitcoin Trust, which owns $27.93 billion, and MicroStrategy, which holds $5.43 billion.
The only other government that holds as much Bitcoin as the U.S. government is Ukraine at $2.01 billion. However, there have been reports that the Bulgarian government holds the most Bitcoin followed by the Chinese government.
What does the U.S. government do with the Bitcoin it seizes?
When crypto is seized, the U.S. government uses the tokens in numerous ways. Sharon Levin, the former chief of the money laundering division, stated that the agency doing the investigation usually determines whether or not seized funds go to the Treasury Forfeiture Fund or the Department of Justice Assets Forfeiture Fund. The Director of the IRS's cybercrime unit, Jarod Koopman, told CNBC that the money doesn't just sit there.
Koopman said, “Agencies can put in requests to gain access to some of that money for funding operations.” The stockpiling of cryptocurrency by the federal government will likely continue as crimes like the previous ones mentioned continue. It remains to be seen what types of regulations will be implemented.