The UK Home Office, in collaboration with the police, is developing a plan to sell confiscated bitcoins worth around £5 billion ($7 billion) to alleviate pressure on public finances. This initiative is considered a potential way to cover the budget deficit faced by Chancellor Rachel Reeves. According to The Telegraph, the decision is driven by the need to fill a financial gap of up to £20 billion, caused by high borrowing costs and weak economic growth.
The exact volume of cryptocurrencies held by UK authorities remains unknown, but it is known that 61,000 BTC were seized in 2018 in a case involving a Chinese financial pyramid. When seized, the value of these assets was around £300 million, but with the rise in bitcoin's price to $123,000 (£92,000), their current market value exceeds £5.4 billion. This growth is driven by the global increase in interest in cryptocurrencies, including new legislative initiatives in the US, such as the Genius Act.
To simplify the sale of cryptocurrencies, the Home Office has initiated the creation of a specialized storage and sales system for crypto assets. The office has announced a tender for the development of a "crypto storage and sales framework," which will centralize and systemize the process of selling confiscated bitcoins and other digital currencies. This decision aims to ensure transparency and efficiency in managing confiscated assets.
The decision to sell bitcoins is made against the backdrop of a challenging economic situation in the UK. Economists forecast that Reeves needs to find up to £20 billion to balance the budget amid high inflation and rising borrowing costs. Attempts to cut spending on social programs, such as fuel allowances for pensioners, have sparked political debates, limiting the government's options. The sale of crypto assets is seen as a way to raise significant funds without increasing taxes.
The initiative has elicited mixed reactions. Former Chancellor Norman Lamont urged Reeves to immediately sell crypto assets to use the funds for current needs. However, experts such as Professor Michael Levi from Cardiff University point out the complexities involved in selling cryptocurrencies. The process may be hampered by lengthy legal disputes, especially in cases where fraud victims demand the return of funds, such as the case of Jian Wen, convicted of money laundering.
Meanwhile, Reform UK's leader Nigel Farage proposed an alternative idea—creating a national bitcoin reserve following the example of the USA. However, the Labour Party rejected this idea, preferring immediate monetization of assets.
Selling a large volume of bitcoins could impact the cryptocurrency market price, especially given the current market volatility. At the same time, successful asset sales could provide Reeves with temporary financial relief, helping avoid unpopular measures like tax increases. However, the long-term implications of such a step, including potential claims from fraud victims, remain uncertain.
The sale of confiscated bitcoins worth $7 billion could be a significant step towards stabilizing the UK's financial position. However, the success of this initiative will depend on effectively organizing the sale process and the government's ability to manage legal and market challenges. Amid economic uncertainty, this step highlights the growing significance of cryptocurrencies in state policies and financial strategies.