Another transfer by the US government of originally seized Bitcoin 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 approximately $593.5 million, were transferred to Coinbase Prime, a platform used primarily for institutional investors.
According to Arkham’s post on X: 10,000 Silk Road BTC ($593.5M) moved to Coinbase Prime. Wallet bc1ql received 10K BTC from a known US Government wallet 2 weeks ago. This BTC has just been sent on to 33J, a Coinbase Prime deposit wallet.”
Is The US Gov Selling Bitcoin?
This transaction comes on the heels of a June announcement from the US Marshals Service (USMS), part of the Department of Justice, detailing a new partnership with Coinbase Prime to provide custody and advanced trading services for the agency’s “Class 1” (large cap) digital assets. The community is torn over whether these moves signify the selling of the Bitcoin or merely a transfer for custody purposes. Thus, many speculated that the US gov is not selling.
However, Scott Johnsson, a finance lawyer and general partner at Van Buren Capital, expressed a distinct view today, arguing that the transaction signals a definitive sale of the seized assets by the US government. Johnsson remarked:
“Yes, US Marshal Service (USMS) is almost certainly selling silk road Bitcoin […] USMS has been sending BTC to a custodial address required by the terms of the servicing agreement […] Given the agreement requires USMS assets remain completely segregated, whenever a transfer is ultimately made to CB prime (or other commingled exchange address), you can be sure USMS has already sold or is selling imminently.”
Johnsson further supported his claim by referencing the DOJ’s Office of Inspector General (OIG) report and the crypto services agreement RFP, which stipulate the rapid liquidation of assets within five business days of forfeiture and the necessity of segregated wallet addresses to prevent co-mingling with other assets.
It states: “The USMS intends to resolve this issue using its planned cryptocurrency services contract, which will require the contractor to liquidate cryptocurrency within 5 business days of the asset being forfeited.”
Johnsson anticipates that formal confirmation of these sales might not emerge until the publication of the DOJ’s Asset Forfeiture Program FY2024 report in January. However, the unfolding events could provide earlier indications as more details become available through official channels or subsequent asset movements.
“Official confirmation will definitively come (at the latest) upon the DOJ’s Asset Forfeiture Program FY2024 report in January, if not earlier. I also don’t think it’s a coincidence this began in earnest following the Trump speech.”
Users on X expressed their confusion regarding Johnsson’s analysis. Rodeo queried: “These coins were supposed to be sold by the end of last year[…] You’re saying the act of transferring these coins to Coinbase from their current address is enough to imply selling because the Coinbase addresses are not completely segregated addresses?”
Responding to these concerns, Johnsson clarified: “Not necessarily Coinbase alone (there’s an interim segregated custody step), but once they hit commingled addresses it’s reasonable to infer they’re sold. And yea, there was a backlog of forfeited BTC that was supposed to be sold already. Finalizing the services agreement appears to have been (at least part of) the hold up.”
Notably, the latest BTC transaction by the US government comes just a few weeks after Republican presidential candidate Donald Trump proposed to establish a “strategic national Bitcoin stockpile” at the Bitcoin 2024 conference. After that, rumors emerged that Democrats under the lead of Kamala Harris could empty the BTC holdings by the US government from confiscations. While Harris pleads to take a more pro-crypto stance, several experts refuse this claim, based on the latest actions by her.
At press time, BTC traded at $59,336.
Featured image created with DALL.E, chart from TradingView.com