Uncle Sam: The World’s Second Largest Bitcoin Holder

Journalist:
August 30, 2014

Uncle Sam, or to be more precise, the US Federal Government, has been busy. Between bouts of criticizing cryptocurrencies, regulating cryptocurrencies and spending a bit of time warning against the use of cryptocurrencies; one would think that Uncle Sam is against us… on closer examination, that may well not turn out to be the case. It seems that Uncle Sam has been playing quite the little game as it is now one of the largest holders of Bitcoin… Ever!

The US Federal Government recently published an investor alert titled: “Bitcoin: More than a bit risky” through FINRA, The Financial Industry Regulatory Authority.  FINRA used, what most would consider to be, highly loaded, language to explain how: “This alert to caution investors that buying and using digital currency such as Bitcoin carry risks. Speculative trading in bitcoins carries significant risk. There is also the risk of fraud related to companies claiming to offer Bitcoin payment platforms and other Bitcoin-related products and services.”

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FINRA, the US Government watchdog, stated that Bitcoin was not legal tender, and that means: “If no one accepts bitcoins, bitcoins will become worthless.” FINRA went on to remind citizens that

  • Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers can—and have—lost money.
  • Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
  • Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
  • Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
  • In part because of the anonymity Bitcoin offers, it has been used in illegal activity, including drug dealing, money laundering and other forms of illegal commerce. Abuses could impact consumers and speculators; for instance, law enforcement agencies could shut down or restrict the use of platforms and exchanges, limiting or shutting off the ability to use or trade bitcoins.

With FINRA batting for the fiat side, we are left under no illusion as to whether any part of the US Government prefers Bitcoin to fiat. The hardline federal attitude towards Bitcoin is even echoed in some states. Please remember the California’s Department of Financial Institutions did send a cease and desist letter to the Bitcoin Foundation, telling it to “cease and desist from the business of conducting money transmission in this state”.  Though, more recently, California has passed legislation that explicitly classifies Bitcoin as legal money. Remember, as well, when New York’s Department of Financial Services, proposed comprehensive regulations for governing virtual currencies. Seen as legitimizing moves by some, the proposed BitLicense regulations are pro-bank and pro-Government.

With all the above, the US Government must figure Bitcoin is worthless, right? Well, no, not at all. Readers may remember an online marketplace called Silk Road that was seized by the US Marshals Service (USMS). Bitcoin was the coin of the Silk Road realm, and the US government recently auctioned roughly $20 million of the cyber-currency seized from the online marketplace. If we accept that the coins were indeed sold, and I’m not entirely convinced, the US Government still holds at least 110,000 bitcoins at a value of $500 each, giving a holding of $55M. Not a bad hoard for a currency that some in the US Government claim has no value! These hoarded bitcoins currently sit at this Bitcoin address: 1i7cZdoE9NcHSdAL5eGjmTJbBVqeQDwgw, which is #2 on the BitcoinRichList.

Note: Others, such as Satoshi Nakamoto, might technically hold more bitcoins (thus diluting Uncle Sam’s true rank) through the use of multiple addresses.

Your thoughts, please.

Featured image from Shutterstock.

Last modified (UTC): September 1, 2014 00:00

PJ Delaney @P.J. Delaney@delboyir

Masters in Public Administration, Bachelors in Mgt., I live in Ireland, I have a bit of a background in Economics and lots of opinions on everything else.