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Does the US government own less Bitcoin than initially thought, or is that Bitcoin just obscured in the government bureaucracy morass?
We dive in today, and we leave with more questions than answers, but we do have a couple answers for you. Welcome to Bitcoin Season two. [upbeat music] Okay, we are back at it again.
Good weekend. This is Bitcoin Season two, writers room, where Colin and I write the screenplay to the weirdest season of Bitcoin. And it's weird again.
Uh, right now we've have senators, uh, spreading, uh, misinformation on Twitter. Potential misinformation. Potential misinformation. Alleged misinformation. Alleged mis... Yeah.
But yeah, another big win for the independent journalists in the room.
We will be anchoring this episode in news broken by the synonymous journalist, Lol Elites, in response to a ten K Bit- not ten K Bitcoin, that would be crazy. [chuckles] Ten thousand dollar Bitcoin bounty by BTC Inc.
and Bitcoin Magazine CEO, David Bailey, about how much Bitcoin does the US Marshal Services hold, not the US government, and that's gonna be a, a big distinction for the episode. And that's kind of been the
fallout of this, or I would say the big takeaway from a lot of people, is that there were originally a lot of rumblings after this saying, "Hey, hang on.
The figure that she cited is, has a huge discrep-- There's a huge discrepancy between the figure she cited and the one that we see on Arkham Intelligence." Yeah.
So let, like, let, let's again lay some foundation here where, um, a lot of people kinda know if you go to, like, bitcointreasuries.net or if you go to Arkham Intelligence, some of your popular, like,
on-chain tracking sites, you'll see the number two hundred thousand Bitcoin thrown around. This is our number, number in reference to how much Bitcoin does the US government own.
Now, there was a lot of attention on this this past January and February as new President Donald Trump signed an executive order creating a str- a national strategic stockpile of Bitcoin, which basically said, "We're just not going to sell the Bitcoin we have."
Now, we weren't, like, fully sure where all that Bitcoin currently existed. Like, is it all just in one, in one big wallet that Trump, you know, in...
He installs, say, Bree's wallet on his phone, and it's now he's got it.
Um, but in, uh, or in reality, it's probably all buried into its, its maybe segmented into various sub-subsectors of the administration and bureaucracy and offices, and that's where the details lie. Because
one of the, like, questions that David Bailey, chair of Bitcoin Magazine, had proposed in early March of this year, uh, was, "We nee- we would like to get some, some specifics on, um, from the US Marshal Service to confirm the quantity of Bitcoin and crypto that they're currently holding."
And he actually dangled a, uh, ten thousand dollar reward to the first journalist.
So Colin, yeah, there it is, as you see it, um- If you're following with us on video, here's the tweet: "I will pay ten thousand dollars to the first journalist who can get US Marshals to confirm the quantity of Bitcoin and crypto they're currently holding."
So what happens next is, um, uh, one of our favorite, like, investigative journal-journalizes, journalists, journalists, uh, Lol Elites for The Rage, um, kind of as like a, a privacy and cyberpunk-focused, uh, media outlet.
She submitted a freed- Freedom of Information Act request. Colin, what's a FOIA request? Uh, FOIAs are super cool. And if you have never submitted one, let me tell you, it is a thrilling experience.
But a Freedom of Information Act request is a stand... is a procedure by which you can request information from the US government.
Now, they don't have to give it to you depending on the nature of the information, but you basically can go onto an online portal or send in a form via mail where you make a specific request for a certain, uh, piece of information and specify which government agency the information would come from.
And like I said, sometimes they will deny it for a number of procedural reasons. They don't have to give you everything, right? Otherwise, we'd already have the Epstein files. Kidding. Not really.
[chuckles] But, so for Lol Elites' FOIA, she went to the US Marshal Services, and she requested the data from them.
And what she found contradicted, at first, we thought, at least, or a lot of people thought, uh, how much government, uh, how much Bitcoin the US government holds.
So looking at this tweet from Lol Elites, um, she found that there was roughly twenty-nine thousand Bitcoin f- um, held by the US Marshal Services. Now, this is the service that deals with the federal courts.
So they're in charge of things like judicial security, um, fugitive apprehension, witness security, prisoner operations, executing court orders, but they are also in charge of asset forfeiture, and that is why, at least in the s- in the case of Bitcoin, they have been in charge of divesting the US government of Bitcoin when it wants to sell it.
So most famously, this has happened through things like the Silk Road, when Silk Road Bitcoin were seized when that-marketplace was shut down in the tens.
And as Lola has found out from her FOIA, and that you can go to The Rage, I'm gonna share that really quickly. This is the, uh, the independent outlet that she runs.
She has posted the full li- um, FOIA request response on The Rage, and she's found that the US government holds roughly...
in the US, the, the US Marshals Service, excuse me, holds roughly twenty-eight thousand nine hundred and eighty-eight BTC.
And this had a lot of people scratching their heads because if you go onto Arkham Intelligence or the U- uh, Bitcoin Treasuries site, you will see that they list the US government as holding almost tw- uh, twenty-three point five billion dollars worth of Bitcoin, a hundred and ninety-eight thousand,
uh, Bitcoin. So roughly a hundred and ninety-eight. It's a hundred and ninety-eight, uh, point zero one two thousand Bitcoin. So what's going on, Charlie? Yeah.
This is very strange, and the heart of it lies in the difference between seized assets and forfeited assets.
So as Lola points out in one of her follow-up explanations, is that there's a sh- big difference between the forfeited assets and seized assets.
Forfeited assets are assets the government totally controls and can do with, do whatever they want with. Um, civil asset forfeiture comes to mind. Um,
you know, something that a lot of our listeners probably really disagree with and dislike, and this is the reason.
T-the other side of this, uh, i-is seized assets, and seized assets are assets that are currently held by the government, but the government doesn't actually have any legal claim on them.
And Lola gives a really good example of the Bitfinex hacked assets that the US government reclaimed, I believe, in twenty twenty-two. So there was a b- huge hack on Bitfinex.
I, I don't remember the number of Bitcoin that was actually ended up being swept, but the US government ended up seizing ninety-four thousand Bitcoin related to that hack.
Now, that is not Bitcoin that the government can lay claim to before it goes through the judicial system, right? Because technically, there are people, just like with Mt.
Gox, who can lay, who l-lay claim, have a claim on those Bitcoin, right? Who would be a creditor in this, in this case.
So those would be completely separate from the stuff that's in the US Marshals Services bucket because the US Marshals Service is, is, is taking Bitcoin from agencies that have already gone through the judicial process to show that it either maybe it, it resulted from a drug dealer or something like marketplace like the Silk Road, where it was illegal activity, so the government can just take control of those things or something like that, right?
So the US Marshals Service controls all the Bitcoin that it holds, and the US Marshals Service accumulated this Bitcoin from a number of different agencies, right?
Like the FBI was the one to originally seize Bitcoin from the Silk Road when it shut down the marketplace, uh, in twenty thirteen.
But it would pass that on to the US Marshals Service for dive-divestiture, uh, or to divest those Bitcoin, right? And we've seen this numerous times over, right?
Like Tim Draper famously bought a lot of Bitcoin through one of these auctions. U- the US Marshals Service has, m- uh, create... Ha-has, uh, hosted a number of auctions for Bitcoin that it has seized.
That is a long-winded way of basically saying that we will never really f- truly know where all the Bitcoin is in the US government, probably, because it could be held in a number of agencies.
The DEA could have some, the FBI could have some, Homeland Security could have some, uh, the Treasury could hold some.
You, you don't really know where it's coming from, and that's why we have this huge disconnect between what is listed on Arkham from its blockchain intelligence and Bitcoin Treasury and what Lola found at the US Marshals Service.
Because Arkham is tracking stuff that it believes to be held, uh, for US government entities in things like Coinbase Prime and Anchorage, but that was actually, they don't hold it anymore 'cause that, that, that contract was closed.
Um, but all of those Bitcoin are... Most of those Bitcoin are probably just seized. They're not forfeited, so the government can't actually lay claim to them yet. [upbeat music] Hey, Will here with Blockspace Media.
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[upbeat music] And [clears throat] that's where we get, um, God bless her, the Senator Cynthia Lummis. Again, I'm, I did a little bit of a bait at the beginning of the episode.
She tweeted, "I'm alarmed by reports that the US has sold off over eighty percent of its Bitcoin reserves, leaving just twenty-nine thousand coins." That is not what this information reveals. Um,
and, uh, again, the Bitcoin Magazine headline also that she sub-tweets is a little bit misleading 'cause it's, um, because the, the Bitcoin Magazine headline says, "US Marshals reveal the government now only holds."
The information narrowly means the US Marshals Service only holds twenty-nine thousand Bitcoin worth three point four billion.
Of the two hundred thousand, or rather specifically one hundred and ninety-eight thousand Bitcoin that the US government claims or es- is estimated to own, we don't know for sure who all has what.
There are some scenarios that could, uh, explain some stuff. One, as you said, ColinOther parts of the government, other agencies could have them.
The Treasury might have some if we start, somehow started actively acquiring Bitcoin.
Um, but there's also another, um, scenario where David Bailey says, um, in response to like, like this Bitcoin and then perhaps other Bitcoin, the Bitcoin sits with a custodian who makes- who just makes intra-ledger adjustments and can sell the whole stack without ever moving anything on-chain.
What does that mean? That means that the US Marshals Service attributes there being twenty-nine thousand Bitcoin, and that Bitcoin is, as David suggests, held with a custodian.
Now, what if all of the Bitcoin or a significant amount of other parts of the Bitcoin, which of the two hundred thousand US attributed Bitcoin, what if that's also held with a custodian?
Let's just use Coinbase as an example, or maybe Anchorage because they're known to like custody with the US government.
This is a scenario where now it gets like really difficult to track this stuff on-chain, um, and now it has to be tracked through disclosures by the government and government entities.
Um, and this also kinda, you know, plays into a similar narrative that, uh, we see emerging this cycle, which is everyone is just kind of off-offloading their custody and security to third parties. Um,
you know, maybe all of the Bitcoin is just with Coinbase. So, you know, in this case, like if the US Marshals Service wanted to sell, we wouldn't necessarily see action on-chain.
We wouldn't see action on-chain, but they would publicize it as they have done in the past. Yeah. Right? So... But that is a good point about the custodian.
That being said, though, if you look at Arkham's website, you can see that in the last few years they've been chipping away, and that makes me wonder exactly what's happening with some of those outflows.
Like where-- And this goes back to just the biggest question. I mean,
the, the problem about this whole thing, I was telling Charlie before we got hopped on here, this whole thing makes me feel [chuckles] really stupid 'cause- Yeah.
-there are so many different agencies that could hold these Bitcoin, and we don't actually know what the transfers mean, where... Like, are they selling them? Where are they going?
Um, are they going-- Are, are, are they being distributed to other parties? And usually with, like I said, with the Marshals Service, they will let us know when they're selling them.
In fact, I have notes here, uh, courtesy of Grok, that the US Marshals Service has sold approximately one hundred and ninety-five thousand Bitcoin,
and that generated, at the time of all sales, on average, three hundred... Or not on average, but in total, cumulative, three hundred and sixty-six point five million.
That would be worth almost nineteen billion dollars today. [laughs] Um- Look, even the government paper handed your Bitcoin.
At least they're not like the German government, who absolutely sold like the near bottom of last cycle. Do you remember that? Yeah. [laughs] The German government, uh, was like selling at like twenty K, which is crazy.
But this is kind of, uh, I think keys into some of the frustrations or the conspiracy thinking. Um, you even saw this from Matt Pines of the BTC Policy Institute.
David Bailey said it, like they had a hunch that the Biden admin- Biden administration was selling Bitcoin.
Um, now that being said, we do see the wallet from Arkham that, that tracks all US government coins or alleges to. Again, I wanna reiterate that like blockchain analysis is not perfect.
We don't know if that's a hundred percent accurate. It's likely not totally accurate. But, um, we do see that balance falling, um, since it peaked, I believe in like twenty-twenty-one, twenty-twenty-two.
When did it peak? Yeah, it peaked at, uh, two hundred and thirty-seven K in December of twenty-twenty-two. [lip smacks] Uh, but we don't know exactly what's happening to that Bitcoin.
We, we have no way of verifying that outside of maybe issuing more FOIAs or waiting to see if there's anything from those government agencies about what's happening.
But there were, there was a lot of confusion about this, rightfully so, I think, 'cause it is a completely opaque process, and, and we don't really know what's going to happen with some of these coins, and most people don't really appreciate the difference between a forfeited and a seized asset.
I mean, I didn't until I started- Yeah. -looking into this, so. Yeah.
And so, um, it, it is interesting because given that this administration has been fairly Bitcoin forward and gone so far as to establish in writing a Bitcoin strategic stockpile
and may possibly do some kind of strategic reserve, if you buy into that, as everyone did literally five months ago, then, um, like it would be great to at least know where that Bitcoin is. Um,
uh, now that Elon is pulling back from Doge, maybe we don't have quite the momentum behind us to establish government transparency, if that was ever, uh, something we could expect from that initiative.
But dang, it, it seems like it'd be really easy for the government to just publish wallets, unless they were with custodians, in which case now you gotta publish balance sheet disclosures. So.
Which is almost certainly the case too. I mean, the US government does use Coinbase for some of its custody, right? Which makes total sense.
Like, I don't really want government bureaucrats managing keys for billions of dollars or hundreds of millions of dollars worth of Bitcoin, right? I mean, you can [chuckles]
imagine a scenario where like Barron Trump is just walking around the White House with an open dime around his neck, like a gold chain with just a cool twenty-nine thousand Bitcoin.
[laughs] That would be pretty cool.Or maybe he's like opening up his-- he's wrapping it, throwing on his MetaMask and like staking WBTC on Aave or something. Yep. Crazier things have happened.
Crazier things have happened.
And I'm looking at my notes here, and I'm realizing some of this stuff that the US Marshals Services holds or has held just goes back into scandals that I don't think most people would even remember now. Yeah.
Like the PlusToken Ponzi scheme. Do you remember PlusToken? Yeah. One of the biggest Bitcoin Ponzi schemes- Yeah... of all time. It was huge. Mainly Uja. Yeah, it was huge at the time.
I reported on it quite extensively, and I honestly, it's been a while, so my memory is very hazy with it.
But, um, the IRS ended up helping track down and freeze, free-- Uh, the IRS was involved in, in tracking down and helping freeze some of those assets.
So I mean, basically, if it's illicit activity and it's tied to US citizens or involves US citizens, if the government gets its hand on it, it could be funneled into the Marshal Services at some point.
But again, it needs to go through, um, some sort of legal procedure to decide what's gonna actually end up happening with those assets, right?
'Cause the government's not just gonna seize things that it can't legally seize. Yeah.
And, uh, you know, the, the goofy inverted white pill here is that, um, one of the benefits, one of the things playing into the favor of hodlers is that the US government, uh, those wheels of justice and resolution grind exceedingly, exceedingly slow, meaning that the US government is probably a better hodler than your average person who owns Bitcoin.
Because like, [chuckles] you know, we're still, what, um, seven or eight years later, waiting on the resolution from the Bitfinex hack, and those Bitcoin are just held and sitting there, and that's a significant amount of BTC.
Um, you know, in a way, this, uh, is taking, taking Bitcoin out of the market out, uh, for a while. So, um, uh, maybe the government, uh, you know, maybe there's a upside to some of these...
upside to the, uh, the really dark side of, uh, asset or civil asset forfeiture. The government secretly has the greatest diamond hands of all. [chuckles] Yes, because they're incompetent. [chuckles] Yeah.
Well, I feel like that kinda like we just wanna touch on this because this has been, uh, a widely circulated topic this week, and everybody's been talking about it.
A lot of people have, uh, inaccurately jumped to the conclusion that the US government sold off eighty percent of their Bitcoin. That is not what this reveals. Um, my gut says that's not true.
Uh, just would be surprised for that to have happened in the past few months under everybody's noses. Yeah.
And the other big takeaway too is that that two hundred K, you know, a hundred and ninety-eight K Bitcoin figure that everyone cites, like the government doesn't own all of that. Yeah.
A-and I think that's the probably the best part about like outside of the figure for what the Marshal Services actually holds, which is really cool, the fact that we got clarity on the government not actually owning those Bitcoin legally because, you know, they're gonna probably distribute, I would imagine, the Bitfinex coins to people who had their coins stolen in that hack or, or give it back to Bitfinex.
Yeah, I mean, what's funny is about the Bitfinex hack is like a lot of those people have been made whole. Yeah.
Because they basically opted for Bitfinex's kind of recovery, uh, es-- you know, reestablishment plan, which weirdly enough did play out. They actually did pull themselves out from this.
They dug themselves out of this hole and, uh, made, I believe, a lot of these people whole or near whole. And so this is like extra Bitcoin, uh, icing on the cake.
I don't know what the actual- Well, I would imagine that if the, the-- for the people who were made whole, they would not receive anything.
I would imagine it would go straight to, uh, iFinex, which is the Bitfinex's parent company, right? Or Bitfine- You know, whatever. It's the same entity. Yeah. Um, also the parent company of Tether.
That's part of the reason why they could make those people whole is 'cause Tether is a just cash monster. [chuckles] Yeah. You know? Yeah. That being said, though, this was not... You know, it's kinda crazy.
That's a kind of a whole other show. Tether was obviously still a giant back in like twenty twenty-two. Or sorry, a few, um, twenty twenty-two is when the government got the coins.
Um, Tether was a rising giant, um, when the hack happened, but it wasn't the, the monolith that it was now, so. Well, there, there you go, listener. There's your food for thought this Saturday morning.
Uh, we will see you all next week for next week's Writers Room. Cheers. Hey, everyone. Charlie here. We're running a quick survey. We want to better understand who our listeners are.
Do me a huge favor and fill out that survey. It takes under a minute, and the link is in the show description. This helps us make better content for you. Thanks a ton for listening. Link in the show notes.
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