Reports confusing the difference between seized and forfeited assets have led pro-crypto Senator Cynthia Lummis to panic that the US has committed a “total strategic blunder” by selling off 179,000 bitcoin (BTC).
Numerous Bitcoiners and crypto news outlets reported that the US sold 85% of its BTC holdings ($21 billion) after a freedom of information request revealed that the US Marshals Service only holds 28,988 in forfeited BTC.
They believed that the US held almost 200,000 BTC (worth $23 billion) based on data from crypto trackers such as Arkham and Bitcoin Treasuries, and that it must have sold off most of this stash.
Upon seeing the reports, a worried Lummis said, “If true, this is a total strategic blunder and sets the United States back years in the bitcoin race.”
Read more: FOIA reveals US Marshals sitting on at least $1.6B in BTC
However, the US doesn’t actually own 200,000 BTC, and this entire sum isn’t going to make up the government’s Strategic Bitcoin Reserve announced this year.
The BTC recorded by Arkham and Bitcoin Treasuries is made up of forfeited and seized BTC.
Forfeited BTC, like that held by the US Marshals Service, is seized first and then approved for compensation to victims or government ownership.
Seized BTC, however, is held by the government until it determines whether it should be forfeited. The 95,000 BTC seized from Bitfinex hackers, for instance, is still unclaimed.
Bitfinex awarded $0 in restitution
Disputes over who is owed bitcoin that the government possesses can drag on for years.
BTC seized from the 2016 Bitfinex hack was originally headed back to Bitfinex until some users claimed they were victims who were owed restitution.
The process of determining who will receive the BTC is still working through the process with an April 4 order throwing the decision over who is owed restitution to a third-party ancillary proceeding.
Since the Strategic Bitcoin Reserve consists only of government-owned forfeited BTC, it won’t, as things stand, contain this Bitfinex seizure.
Regardless, the US government hasn’t sold billions of dollars worth of BTC, and its Strategic Bitcoin Reserve will be significantly less stocked based on the disclosure.
Users used the Arkham data to call the coverage by journalist L0la L33tz, the journalist behind yesterday’s FOI, a conspiracy.
However, BTC treasury firm leader David Bailey also noted that Arkham “doesn’t account for a custodian making intraledger transactions.”