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US Government To Convert Silk Road Bitcoins To USD
angry tapir writes "The founder of the Silk Road underground website has forfeited the site and thousands of bitcoins, worth around $28 million at current rates, to the U.S. government. The approximately 29,655 bitcoins were seized from the Silk Road website when the Federal Bureau of Investigation (FBI) moved to close it in late September. 'The United States Marshals Service shall dispose of the Silk Road Hidden Website and the Silk Road Server Bitcoins according to law,' wrote Judge J. Paul Oetken, of the U.S. District Court for the Southern District of New York, in a court order that was issued this week. The ruling represents the largest-ever forfeiture of bitcoins. 'It is the intention of the government to ultimately convert the bitcoins to U.S. currency,' said Jim Margolin, a spokesman for the U.S. Attorney's office for the Southern District of New York."
News at 11.
I understand that some people at slashdot love to argue about bitcoin, one way or another. But do we really have to have an article whenever someone decides to buy or sell some of them?
Are there even enough BTC exchanges out there to actually convert that much BTC into USD?
If there aren't, and the US government is persistent enough, wouldn't they be able to effectively "lock out" everyone else from getting money out of the system by basically draining the exchanges dry?
Like it or not, BTC is worthless unless you can exchange it for IRL bucks. It's a cute experiment and all, but at the end of the day your average shop keeper has to turn his BTC into something he can pay his rent with. If the US government is somehow able to effectively launch a "DoS" attack against all the exchanges, then what is going to happen to BTC?
According to the law, the guy hasn't actually been convicted of anything yet, so WTF?
I thought bitcoins weren't legal tender.
Politics; n. : A religion whereby man is god.
I thought bitcoins weren't legal tender.
You can sell other things than legal tender. Happens all the time.
i guess if the bitcoins were illegal the government would have to destroy them.
gj creating a new currency bitcoin, i didn't see that coming
Wasn't those bitcoins marked as forfeited on the various block watching sites?
If nobody want those bitcoins, they might be very hard to sell while other bitcoins can be sold without a problem.
Like gold, silver... and junk.
So does this action somehow legitimize bitcoins?
Sure, you can't pay your mortgage with them at this point, but doesn't this mean that the US Federal Gov't now recognize that it has some legitimate value?
How will selling that many bitcoins affect the exchange rates?
Those BC are going to be trackable for a while at least.
Am I the only one that read the summary and thought it would just give them another excuse to print 28M of IRL money? I didn't even think about exchanging, but I'm sure that's what they mean by 'convert' and not "Hey we just effectively seized 28M of USD, let's make sure the mint produces that much more since we can't exactly touch bitcoins"
and deprived the Fed of tax revenue because they did it in a currency that the Fed don't control, the Fed get pissy and fucking STEAL IT!?
Something is VERY FUCKING WRONG with this picture!
Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
That is all.
My ism, it's full of beliefs.
Silk Road held an appreciable fraction of the world supply. Sure they'll make millions upon millions, but that's a drop in the US government's budget. The effect, and certainly the actual intent, is to punch the bottom out of the market.
Gold is at least pretty and useful in a number of industrial and electrical applications.
Of course, I don't trade in gold coins anyways - assessment costs* will eat up any 'profits' from gold price increases 9 times out of 10.
*To determine the purity of the gold hasn't changed since you got the coins.
I don't read AC A human right
Well, at least by selling them and not outright destroying them or sitting on them forever, the feds have endorsed that they are at least legal to possess.
Ironically this may actually legitimize them.
The gov't ought to sell them at a premium price - "Get your honest-to-goodness commemorative "Silk Road Evildoer Bitcoin (tm)" right here! Only $MARKET_PRICE * 10 !!!
Tiller's Rule: Never use a word in written form that you've only heard and never read. You will end up looking foolish.
"to ultimately convert the bitcoins to U.S. currency," nuff said
Why? What possible justification do you have for this?
> One might also argue in future legal cases involving bitcoin that when the US Government
> converted these bitcoins, at that point they acknowledged them as official legal tender,
One might also be an idiot. The government sells their surplus office chairs. Does that mean office chairs are legal tender?
Selling something has nothing whatsoever to do with it being legal tender.
Legal tender is whatever you are REQUIRED to accept as payment for debt. You borrow$1,000 from me. I sue for non-payment. You say "I tried to pay him with $1,000 worth of chickens." I win, because you owed me $1,000, not 500 chickens. You say "I tried to pay him with a check". I say "we don't accept checks." I win. I don't have to accept checks. You say "I tried to pay him with ten $100 bills." You win, because US currency is legal tender for all debts, both public and private. It says so right on the bill. If you said "I tried to pay him 0.9 bitcoin, that would be exactly the same as saying "I tried to pay him chickens" - you owe dollars, not chickens or bitcoins.
'It is the intention of the government to ultimately convert the bitcoins to U.S. currency,'
Good luck with that. I've been waiting 3 months now for my U.S. currency.
acquitted... what then? the bits belong to him, dont they? conversion to dollars would amount to destruction of evidence, would it not?
The government sells their surplus office chairs.
Office chairs aren't tender.
The government sells radio channels.
Radio channels aren't tender.
The government sells bitcoins.
Bitcoins aren't tender.
Legal tender is whatever type of payment you are REQUIRED to accept.
If you eat at a restaurant and when the bill comes you try to pay with a check, they can say "we don't accept checks." If you refused to pay with anything other than a check, they could call the police or sue you for the $12. They can also say "we don't accept credit cards.". They HAVE to accept cash. If they refused your cash and then tried to sue you, the judge would laugh and tell them to read the $20 bill. It says right on the bill "this note is legal tender for all debts, both public and private.". That means you can't refuse cash and then claim that someone didn't pay. THAT is legal tender.
Office chairs are not a tender because you can't force the restaurant to accept office chairs as payment. The fact that the government sells office chairs has nothing to do with it. They are still chairs, not money. The government can sell toys. Bitcoins are still toys, not money.
The team that seized them will get credit for an $X million seizure. They can then say "for every $1 the FBI puts in our budget, they get $10 back." Followed "we'd like a budget increase of $3 million please. Remember, for every dollar you put in our budget, you get $10 back."
The agency I work for makes exactly that argument since we sell our services to other states. We bring in more money than we cost, meaning we are a net win for the taxpayer. Our budget doesn't get cut and my job is safe.
Well.... The gourverment in the us, is in their full right to seize anything that is related to crime. People... You cant not call that stealing. Silk road did some illegal stuff, no question about that. What I have a hard time understanding, is the fundamental issue, in selling something that are seized. For me, that is the same as making money on the one thing that you have set out to stop. For me, that makes the gourverment taking part in the chrime they wan't to stop in the first place. They should just store whatever they have seized, and never ever letting those things get out into the open market.
Ironic. Bottom line, this will cause a devaluation in BitCoin. Someone(s) will choose to buy the coins. A boycott by some buyers will simply drive down the price.
For anyone wanting to go off the grid, cash doesn't get tracked like plastic.
Then bans its use, plunging its value.
It's exceedingly difficult to trace.
"Lack of speed can be overcome. In the worst case by patience." --Znork
It would be nice to actually have a trial before doing anything.
Ironically, it's far harder than bitcoin to trace, since it doesn't have a transaction log.
It would seem likely the US government will hold an auction of these bitcoins for "real" currency. This should yield the required information to tie up a lot of wallets with real life identities. Perhaps this is a trap for people who have been dealing on SR?
There are no transaction fees, either for you or for the businesses you patronize. If you want to support local businesses, use cash.
If they use legal exchanges... then they legitimize BC exchanges (At least US ones).
If they sell as a personal transactions they are forced to use the BC network, hence legitimizing it as "something not illegal used to transfer BC".
Unless they sell the wallet credentials on a public auction, and somebody accepts that sort of deal. Then you have a chairs equivalent.
in any case it can be used as a precedent for making BC legal (legal as a chair vs pot). Further regulations might be applied in the future, and ultimately, no government gives a shit about anything it did in the past.
Civil Forfeiture law is insane.
It's nothing more than govt-sponsered armed robbery.
When the judge says to dispose of it according to law, he might as well just say "keep the money for yourselves." That is precisely what that police division will, in fact, do.
Most of the avenues of bitcoin-to-dollar conversion are a nasty morass of institutions waiting as long as humanly possible to actually part with real money, or shady scams.
There's also the conundrum of dumping a wallet that big.
Do you dump all at once and crash the market?
Do you take forever and a day to dump it in the hopes of retaining cash value?
Chas - The one, the only.
THANK GOD!!!
In Canada there is a law against living off the avails of crime also known as the proceeds of crime. But the Government seems to exempt itself from laws in the same manner as our neighbour in the United States of America. Maybe Obama can make an interest payment on the national debt for a single day.
Because securing and transporting money is free!
Almost certainly they will just auction them off like they would with a seized car or house. Someone will probably pay 97 cent or so to the dollar on the spot exchange rate of bitcoins to dollars on that day and it will be his problem to convert them on an exchange.
I think they're looking for "exchange". "Convert" would mean the bitcoins disappear in the process and magically transmute into dollars. The bitcoins don't go away, they just change hands.
The article makes it sound like they're gong to create money from nothing to boost the US treasury or something like that. The dollars would come from other people.
If they dump that many Bitcoins all at once then the price will plummet. Intentional?
The solution is simple. The way bitcoin (and other cryptos) are architected, each transaction is public record. The US government's bitcoin address(es) tied to this particular event are publically know. Any address they transfer coins to will also be publically known (since each transaction is visible to the public).
Like any malicius and malfeasant entity, the US government can be barred from 'doing business' with exchanges if the exchange operators are able to blacklist all of these government owned addresses.
This will at least force the criminal enterprise known as the US government to sell their stash piecemeal to individual shady dealers, rather than being allowed to conduct business as if they were a legit entity on any of the large exchanges such as cryptsy, mt gox and bter.
You seem to be missing the important word - "debts". The phrase is "legal tender for all debts".
If you walk into a convenience store and offer to buy a case of beer for $1 in currency, they can decide not to sell to you.
If you've already consumed a beer at a bar and you owe them $1, paying US currency (legal tender) absolves that debt.
They can't claim you didn't pay your bill if you hand them legal tender. They CAN say "no credit cards for purchases under $10"
because credit cards aren't legal tender.
You might say "but they don't have to accept a $100 bill to pay a $1 tab, do they? What if they don't have change?"
They aren't required to have change on hand. They ARE required to accept US currency to pay an existing tab.
So you can (legally) insist that they take your $100 to pay the $1 tab - you just can't insist on getting any change back.
In addition to debts, 5103 specifies that all taxes and government charges can be paid in US currency.
Finally, it says that foreign currency is NOT legal tender in the US - I can choose to trade you a watermelon for 500 Jamaican dollars,
but if you owe me $500, I don't HAVE to accept Jamaican dollars as payment. As the treasury site notes, I also
don't HAVE to sell you the watermelon in exchange for US cash. The law only forces me to accept cash for a DEBT,
for the case where you've already eaten the watermelon and now you need to pay for it.
You're ignoring not only the key word in "legal tender for all debts", but also the key sentence is the very paragraph that you quoted. .. creditor. You don't have to sell
As you yourself quoted, legal tender is for "payment for debts when tendered to a creditor". Debts
me your car, not for credit, not for cash. If you already sold me your car and I still owe you $200 on it, THEN you have to accept cash.
Once I hand you $200 cash, I've paid and you can't add on late charges saying I didn't pay because you don't accept cash. For DEBTS,
you have to - a payment in cash is a payment of the debt.
Your copy and paste must be broken. Somehow your copy and paste from treasury.gov left out the sentence that says they
have to accept cash as payment for something you owe them, like the meal check you're replying about. The part your
copy-paste removed is:
"This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor."
If you walk in and say "I'll give you five dollars for a pizza" they can say "sorry, we're closed" or "pizza is $10" or "cash only" or "Paypal only".
If you've already eaten the pizza and now it's time to pay the bill, that's a debt. When you hand them a $20 bill, they can't call the police and claim it's a dine-and-dash.
This was my misconception as well until I read this on Wikipedia's "Legal Tender" page:
There is, however, no federal statute that a private business, a person, or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in cents or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.[26]
Just another day in Paradise
> in any case it can be used as a precedent for making BC legal (legal as a chair vs pot).
Possessing pot is illegal because the Controlled Substances Act (21 U.S.C. 811) says "it is a crime to posses marijuana".
There is no such crime as "possession of chairs" or "possession of bitcoin". They are "legal" simply because there is no law
saying otherwise. When the police arrest someone, they check off a box on the form indicating which crime they are
arresting the person for. "Possession of bitcoin" (or chair) isn't on the form. It simply isn't there. In the statutes, there is
no such crime.
The government selling chairs or bitcoin in no way makes it so that there is more "no such checkbox".
No such crime existed last year, and no such crime exists this year. It's not more non-existent because
the FBI holds yet another property auction.
You seem to be missing the important word - "debts". The phrase is "legal tender for all debts". If you walk into a convenience store and offer to buy a case of beer for $1 in currency, they can decide not to sell to you.
If you've already consumed a beer at a bar and you owe them $1, paying US currency (legal tender) absolves that debt. They can't claim you didn't pay your bill if you hand them legal tender. They CAN say "no credit cards for purchases under $10" because credit cards aren't legal tender.
You might say "but they don't have to accept a $100 bill to pay a $1 tab, do they? What if they don't have change?" They aren't required to have change on hand. They ARE required to accept US currency to pay an existing tab. So you can (legally) insist that they take your $100 to pay the $1 tab - you just can't insist on getting any change back.
In addition to debts, 5103 specifies that all taxes and government charges can be paid in US currency. Finally, it says that foreign currency is NOT legal tender in the US - I can choose to trade you a watermelon for 500 Jamaican dollars, but if you owe me $500, I don't HAVE to accept Jamaican dollars as payment. As the treasury site notes, I also don't HAVE to sell you the watermelon in exchange for US cash. The law only forces me to accept cash for a DEBT, for the case where you've already eaten the watermelon and now you need to pay for it.
Interesting but incorrect. Cash is a legal offer for payment but there is no requirement that anyone accept the offer. the can simply say "No CASH" and if you try to pay in it refuse it. Merely being legal tender does not require acceptance, as the Treasury rightfully points out. Most people do, but there is no law saying they must accept cash.
I'm a consultant - I convert gibberish into cash-flow.
For anyone wanting to go off the grid, cash doesn't get tracked like plastic.
Hint: For anyone carrying around a cell phone (or posting on /. for that matter), you are hardly off the grid, so let's stop pretending we're Joe Offline sitting in a woodland shack somewhere pedaling a transformer to keep the AM radio on.
And with drones coming in the next decade, good luck finding "off". Anywhere.
There are standard procedures for this sort of thing. If the Government seizes regular financial assets such as stocks or bonds, the U.S. Marshalls Service sends them to a licensed broker to be sold. Less liquid assets are sold off at auctions. Here's the current list of auctions. There's a list of used stuff available, from fur coats to USB cables. And lots of bling - gold chains, Rolex watches, gold and silver bars, men's diamond bracelets... Want a cross necklace with 171 diamonds? They've got that. (Some of this stuff just screams "I am a drug dealer.")
Liquidating Bitcoins will be easier than unloading much of that overpriced crap.
Forgetting the law, I'm confused as to how exactly the government is going to do this at all. I've been under the impression that the actual wallet files are encrypted and that as such, even if the government takes your computer and gets a copy of the wallet file, they would still need your password to actually spend them. Hence the invention of brainwallets and the like.
How are they pulling this off from a technical perspective?
That is from Wikipedia's "Legal Tender" page.
Its an interesting point though GP doesn't have the right words for it. If the US government seized a bunch of Liberty Dollars the proper thing to do would be to destroy them since they are illegal to transact. By selling them they are making it more difficult for themselves to issue a similar ruling against bitcoin in the future.
To destabilize the bitcoin market. Pseudo anonymous bartering mechanisms scare the feds.
Of course so does paper money.. for similar reasons.
---- Booth was a patriot ----
There is so much irrational fear and baseless speculation here.
1) Seized assets are sold at government auctions open to the public. They will be announced well in advance of the auction. It won't be a 30 second warning then it hits the auction block.
2) Regarding #1, The central bank, the CIA, the Illuminati etc. aren't going to have some secret back room deal to buy the coins. That's just not how seized assets are liquidated and why in the hell would they wait for a seized asset auction to begin with. Just makes no sense at all.
3) Seized assets often have reserves set at auction, reserves set by the federal agency responsible.
4) Seized assets are often broken into smaller lots. Why? Faster selling at prices closes to market value. The auction portion is outsourced to auction companies who have incentive to ensure property is auctioned for the highest value possible because they get paid on some transaction fee %
5) Regarding 3+4 above, the likelihood of all the BTC selling for far below fair market value is extremely low. The parties involved, do seized asset auctions for a living and know how to get the most for an item at auction. They will treat this as any other valuable item with a market and base their reserve prices and auction style decisions on that market.
6) This will effect the price regardless of who buys them and what they do with them afterward.(hold or dump) minimally and only in a very short term time frame. Yes even if they are immediately all dumped on open market.
7) This liquidation of assets won't happen any time soon. The assets will be researched and the market value determined. This will drive the decision to split it into lots or keep it whole. Then They have to give public notice of the auction. This process could realistically(considering how slow the government is) take months into years.
New Economic Perspectives
For bitcoins to be in any way similar, you'd have to have a reliable third party willing to exchange them for USD/EUR/JPY at a fixed, or close to fixed rate.
And there are tons of such exchange.
Bitpay was mentionned, coinbase is another, and there are several others too.
And the peculiarity:
- With paypal (which is a particular online service), the only way to receive money from a paypal using customer is to use paypal your self, accept the payment to your business' paypal account and wirhtdraw it. You can't use anything else than paypal. And if paypal freezes your account, you're screwed.
- With bitcoins (which is simply a protocol), you chose were to receive your coins (official bitcoin-qt client, web-based wallet, web exchange, offline wallet, etc.) and you have the freedom to choose your methode to convert it back into your local currency (payment processor as mentionned above, or an on-line crypto-currency exchange, or person-to-person exchange like localbitcoins, etc.)
The choice of system of your customer doesn't impose anything on your choice of payment processing. And vice versa. As long as both end-points of the transaction use the same crypto-currency protocol.
Bitcoins brings to the whole internet, the freedom and easiness of payment that SEPA brought to european countries (except that bitcoin is much faster than SEPA money transfers).
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
Your "anonymous" currency that can't have transactions reversed can be rendered worthless by being put on a blacklist by somebody?
There is no such thing as an "official blacklist".
On the other hand, bitcoins are traceable by design (the security of the cryptocurrencies works this way).
For any transaction, it's possible to traceback and see if the coins have been through the wallet that was identified as the where the government put the seized silk road bitcoins.
So when someone offers you a payment in bitcoin, you can determine if they are the governement or someone who accepted the government's coin.
Now it's up to you to decide if you accept those coins or not.
So even if the coin aren't really blacklisted, they could be effictively be refused by people who are pissed by the seizure of silk road.
On the other hand, nothing prevent other people who don't give a damn about them to still accept them.
We'll see which situation will predominate.
A third solution would be the major exchanges - the exchanges with the actual monetary reserve able to exchange that many bitcoin to collude and refuse accepting them, forcing the government to exchange through an person-to-person exchange (like bitcoin) and then some individual buyer accepting them only for a ridiculous price, well under market value... and than subsequently using the acquired coins at their current market value to give them away (charities, donnations, fawcets, etc.) in a way that is accepted by a big chunk of the community.
Such a coup would require coordination (hard...) but would insure that the government doesn't make much money, while at the same time avoiding a bunch of controversial coins sitting on a wallet.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
The US government want to exchange them for money.
Only the few major exchanges with enough USD reserve needs to coordinate. (MtGox, Bitstamp, and BTC-e maybe, I think), and the government is barred from exchanging them, and is forced to either only exchange small portions on exchanges that don't participate in the ban, or trying to find a direct buyer on person-to-person systems (like bitcoins).
Now all it takes is that only a single buyers accept the whole lot only for 1$ max. And the goes on to spend the acquired bitcoin on donation and charities. And thus becomes an instant bitcoin community hero.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
31 US Code 5103 is only a few sentences. Go read it .
I never understood why people feel the need to invent imaginary lawyers to read for them and pronounce their guess as correct. Obviously you yourself can read - you read my post.
What 5103 says is that a debt paid with cash is a debt paid. In the case of your hypothetical bar, they couldn't have you charged with dine-and-dash or sue you. If they sued you, they'd be suing for $4 - the value of the drink. You already GAVE them $4.
Note that the bar COULD offer to trade drinks for bitcoins, and refuse to serve you if you offered cash. They don't have to sell you the DRINK for cash. However, if they sell you a drink on credit (running a tab) that's a debt you owe them. Debts are payable with US currency. That's 31 USC 5103.
Someone please implement a community based coin block.