Another transfer by the U.S. government of bitcoin originally confiscated from the notorious Silk Road has sparked widespread speculation on Wednesday, August 14. Blockchain analytics firm Arkham reported yesterday that 10,000 Silk Road btc, valued at roughly $593.5 million, was transferred to Coinbase Prime, a platform primarily used for institutional investors.
According to Arkham x.com/ArkhamIntel/status/1823755773987500286″ target=”_blank” rel=”nofollow”>mail In x: 10,000 btc from Silk Road ($593.5M) was transferred to Coinbase Prime. The bc1ql wallet received 10,000 btc from a known US government wallet 2 weeks ago. This btc has just been sent to 33J, a Coinbase Prime deposit wallet.
Is the US Government Selling bitcoin?
This transaction comes shortly after a June announcement from the United States Marshals Service (USMS), part of the Department of Justice, detailing a new partnership with Coinbase Prime to provide advanced custody and trading services for the agency’s “Class 1” (large-cap) digital assets. The community is divided on whether these moves signify the sale of bitcoin or simply a transfer for custodial purposes. Thus, many speculated that the U.S. government is not selling.
Related reading
However, Scott Johnsson, a financial lawyer and general partner at Van Buren Capital, x.com/SGJohnsson/status/1824285716286751214″ target=”_blank” rel=”nofollow”>voiced Today, there is a different view, which holds that the transaction marks a final sale of the assets seized by the US government. Johnsson noted:
“Yes, the United States Marshals Service (USMS) is almost certainly selling bitcoin from Silk Road (…) USMS has been sending btc to a custodial address required by the terms of the service agreement (…) Since the agreement requires USMS assets to remain completely segregated, whenever a transfer is made to CB Prime (or another combined exchange address), you can be sure that USMS has already sold or is imminently selling.”
Johnsson further backed up his claim by referencing the Department of Justice’s Office of Inspector General (OIG) report and the crypto services agreement RFP, which stipulate prompt liquidation of assets within five business days of seizure and the need for segregated wallet addresses to prevent commingling with other assets.
He states: “The USMS intends to address this issue by utilizing its planned cryptocurrency services contract, which will require the contractor to liquidate the cryptocurrency within 5 business days of the asset being lost.”
Related reading
Johnsson anticipates that formal confirmation of these sales may not emerge until the release of the Justice Department's fiscal year 2024 Asset Forfeiture Program report in January. However, unfolding events could provide earlier indications as more details become available through official channels or from subsequent asset movements.
“Official confirmation will definitely come (at the latest) in the Justice Department’s fiscal year 2024 Asset Forfeiture Program report in January, if not before. I also don’t think it’s a coincidence that this started in earnest after Trump’s speech.”
x users expressed confusion regarding Johnsson’s analysis. Rodeo asked: “These coins were supposed to be sold late last year (…) Are you saying that the act of transferring these coins to Coinbase from their current address is enough to imply a sale because Coinbase addresses are not fully segregated addresses?”
In response to these concerns, Johnsson clarified: “Not necessarily Coinbase alone (there is an interim segregated custody step), but once they hit combined addresses it is reasonable to infer that they are sold. And yes, there was a backlog of confiscated btc that was supposed to have already been sold. The termination of the services agreement appears to have been (at least part of) the delay.”
It is worth noting that the latest btc transaction by the US government comes just weeks after Republican presidential candidate Donald Trump proposed establishing a “strategic national bitcoin reserve” at the bitcoin 2024 conference. Following that, rumors surfaced that Democrats under the leadership of Kamala Harris might empty the US government’s btc holdings from confiscations. While Harris advocates for a more pro-crypto stance, several experts reject this claim, based on her latest actions.
At the time of writing, btc was trading at $59,336.
Featured image created with DALL.E, chart from TradingView.com
