Another transfer of originally confiscated Bitcoin from the infamous Silk Road by the U.S. government sparked widespread speculation on Wednesday, August 14. Blockchain analysis firm Arkham reported yesterday that 10,000 BTC from Silk Road, worth about $593.5 million, had been transferred to Coinbase Prime, a platform primarily used by institutional investors.

According to Arkham fasting on X: 10,000 Silk Road BTC ($593.5M) transferred to Coinbase Prime. bc1ql’s wallet received 10k BTC from a known US government wallet 2 weeks ago. This BTC was just sent to 33J, the Coinbase Prime custodial wallet.”

Is the US government selling Bitcoin?

The deal comes on the heels of a June announcement by the U.S. Marshals Service (USMS), part of the Department of Justice, detailing a modern partnership with Coinbase Prime to provide custody and advanced trading services for the agency’s “Class 1” (large-cap) digital assets. The community is divided on whether these moves represent a sale of Bitcoin or merely a transfer for custody purposes, which is why many have speculated that the U.S. government is not selling.

However, Scott Johnsson, a financial lawyer and general partner at Van Buren Capital, Expressed today dissenting, arguing that the transaction signals a final sale of the seized assets by the U.S. government. Johnsson noted:

“Yes, the US Marshal Service (USMS) is almost certainly selling Bitcoin from Silk Road […] USMS sent BTC to the deposit address required by the terms of the service agreement […] Given that the agreement requires that USMS assets remain completely segregated, whenever a transfer to CB Prime (or another linked exchange address) occurs, one can be assured that USMS has already sold or will sell soon.

Johnsson supported his claim by citing a report by the Department of Justice’s Office of Inspector General (OIG) and a Crypto Services Agreement Proposal Request, which mandates the rapid liquidation of assets within five business days of forfeiture and the operate of separate wallet addresses to prevent commingling with other assets.

The document states: “USMS intends to address this issue through a planned cryptocurrency services contract that will require the contractor to liquidate cryptocurrency within 5 business days of asset forfeiture.”

Johnsson predicts that formal confirmation of these sales may not come until the Justice Department’s FY2024 asset seizure program report is released in January. However, developing events could provide earlier clues as more details become available through official channels or subsequent asset movements.

“The official confirmation will finally come (at the latest) in the Justice Department’s report on the fiscal year 2024 asset forfeiture program in January, if not sooner. I also don’t think it’s a coincidence that this started in earnest after Trump’s speech.”

X users expressed surprise at Johnsson’s analysis. Rodeo asked: “These coins were supposed to be sold by the end of last year[…] Are you saying that the mere fact that these coins were moved to Coinbase from their current address is enough to suggest a sale because the Coinbase addresses are not completely separate?”

In response to these concerns, Johnsson explained: “Not necessarily just Coinbase (there is a temporary separate escrow stage), but once they hit the connected addresses, you can reasonably conclude that they were sold. And yes, there was a backlog of forfeited BTC that was supposed to have been sold already. It seems like the finalization of the service agreement was (at least part of) the delay.”

Interestingly, the latest BTC transaction by the US government came just weeks after Republican presidential candidate Donald Trump proposed the creation of a “strategic national Bitcoin stockpile” at the 2024 Bitcoin Conference. This was followed by rumors that Democrats led by Kamala Harris could empty the US government’s BTC holdings of confiscations. While Harris has pleaded for a more pro-cryptocurrency stance, several experts have dismissed this claim based on her recent actions.

At the time of going to press, the BTC price was $59,336.

Featured image created with DALL.E, chart from TradingView.com