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."

Comments

Marked as forfeited?

[Anonymous Coward]

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.

Re:Marked as forfeited?

[magic maverick]

That would be an interesting point. However, there is no method currently in BitCoin to prevent seized bitcoins from being "spent" (transfered to another address). Nor, as far as I know, is there any wallet that would highlight that a particular bitcoin is "bad". So, if the gov. does it sensibly, they could easily sell off these bitcoins for cash. Hell, they could even just hold an auction rather than going through an exchange. They probably will do that. And they'll find someone willing to pay at least $10 a bitcoin (which is like 1% of the current value) because once they bitcoins have changed hands, they are easy to launder (or "mix") if not to just spend.

Re:Marked as forfeited?

[Dr_Barnowl]

You're running into one of the properties of BitCoin here - it's not anonymous, it's pseudonymous. You can't hide the transaction history of a given coin, because that's how BitCoin works - it's a single vast verifiable public transaction log. If someone doesn't want to accept coins that passed through a particular wallet, then it's easy to verify this. And if there are enough people who won't touch Silk Road coins, then their value will be dubious to the people who ordinarily would.

It's impossible to "launder" BitCoin for this reason - you can always trace the entire transaction history for a given coin or subdivisions thereof.

That said, I think it's unlikely that people will turn them down.

Re:Killing two birds with one stone?

[Anonymous Coward]

You arguments about Bitcoin's level of acceptance can be equally applied to PayPal in 1999. There where almost no sites accepting PayPal balance and you certainly could not pay your groceries and rent with PayPal. If someone sent you money with PayPal, all you could do was withdraw it to your bank account in local currency and that was about it.

While I'm not claiming Bitcoin is comparable to PayPal, you arguments are weak. Bitcoin is already serving niche markets that can't take PayPal, say online drugs. It also enables deals that would not have been possible with reversible payment methods. Between the high fees of Visa, NSA's prying eyes and PayPal's overall suckiness, cryptocurrency like Bitcoin really has place.

Should you "invest" in Bitcoin ? Probably not.

Re:Killing two birds with one stone?

[Anonymous Coward]

No one has bought these BTCs that the US government wants to withdraw, someone has created them and then traded them.

No-one has "bought" the USD that might be in your bank account, either. The US government has created them, and then traded them.

Re:Killing two birds with one stone?

[thunderclap]

Overstock.com is taking BTC. So are many others. If you actually look back in our history you will see that the dollar didn't reach wide acceptance to post civil war. So BTC is a viable currency in its growth stages. You being a luddite is fine. Its your right. Just don't whine when your Landlord in 2025 does only take BTC.

Value of Gold

[Firethorn]

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.

Re:Killing two birds with one stone?

[Anonymous Coward]

540K is the total number of bitcoins moved by the network, including coins shuffled around between wallets of the same persons. It has nothing to do with trading volume.

If you tally up all daily volumes listed here in the last column: http://bitcoincharts.com/markets/ you get about 40K bitcoin traded daily. Bear in mind that most of that is daytrade, money circulating inside the exchange with equal buying and selling pressure. That statistic is also impossible to verify, many exchanges publish fake volume data to bolster perceived market share.

A 28K exit into dollars will definitely dive the price and block any single exchange.

Re:Government sells seized assets

[bluefoxlucid]

The DEA actually had put out a memo a few years back that said they will not bother to raid properties where persons are using drugs if the property is worth less than $50,000. It was the memo about how landlords forfeit their right of ownership if they knowingly allow the usage of drugs on their property--which was attached particularly to people having some kind of pot-smoking parties in states that had legalized or had planned to legalize marijuana. They directly stated that action would not be taken--no raids, no arrests, no seizure--on properties valued at under $50,000.