The UK government plans to auction 61,000 Bitcoins. Will the Whale dumping impact Bitcoin?

The cryptocurrency market is always full of variables, and when the government becomes a "Whale," its every move greatly affects the nerves of the market. According to a report by the UK Telegraph on the 19th, the UK Home Office is working with the police to liquidate approximately 61,000 coins, worth about $7.2 billion (around £5 billion) in Bitcoin. This batch of Bitcoin originates from earlier in 2024, when a woman named Jian Wen was convicted of international Money Laundering activities, and the UK Crown Prosecution Service had frozen and confiscated her assets back in 2021. At that time, the value of these Bitcoins was about $1.7 billion, but now, due to the pump in coin prices, it has become a key "windfall" in the hands of UK Chancellor Rachel Reeves. Will the auction of this massive amount of Bitcoin impact the market? How will it affect global perceptions of Crypto Assets?

The UK's Fiscal Gap Meets the "Windfall" of Blockchain

Since the beginning of this year, the growth of public spending in the UK has become unbalanced with tax revenue growth, leading to a further deterioration of the budget deficit. The team of Chancellor Reeves originally planned to make up for the fiscal gap through tax reform and bond issuance, but the Home Office found after an inventory check that the accumulated confiscated Crypto Assets over the past seven years have become a substantial source of cash due to the increase in coin prices.

If fully liquidated, 7.2 billion dollars is roughly equivalent to one-tenth of the UK's annual infrastructure budget, enough to alleviate financial pressure in the short term. Recently, Bitcoin prices reached new highs, which has made the Treasury aware of the urgency of "liquidation." This batch of Bitcoin seized from criminal activities unexpectedly becomes an important chip for the government to relieve financial pressure, and also highlights the complexity and potential value of crypto assets in modern society.

Three Challenges: Legal, Technical, and Market

However, converting digital assets on the blockchain into British pounds is far more complicated than one might think. The UK government faces three main hurdles:

Legal Challenges: First, there are legal issues. In 2018, victims in China made a request for the return of assets to the Royal Prosecutor's Office, and the High Court must decide whether the government can directly allocate the assets to the Treasury. Although the "2023 Economic Crime and Corporate Transparency Act" grants seizure powers, it also requires a clear order of compensation, which undoubtedly prolongs the entire process. Official estimates suggest that completing all procedures takes an average of one year, with complex cases likely dragging on for four years.

Technical Barriers: The second challenge is on the technical level. In May, the Ministry of the Interior released a tender worth £40 million, seeking external organizations to assist with the custody and phased sale of assets. However, as of the time the report appeared, no suitable bids had been received that "met the integrated security, wallet management, and market execution standards." This indicates that even government agencies face challenges in professional technology and security when dealing with such large-scale crypto assets.

Market Risk: The third risk is market risk. The price of Bitcoin is highly volatile, and a one-time sell-off could depress the market, resulting in a final recovery amount that may not reach the book value. The Ministry of Finance is internally evaluating the use of "regular auctions" or "over-the-counter trading" models to mitigate the impact, but market uncertainty remains pervasive. The historical lesson from 1999, when the UK sold gold and missed subsequent price increases, is frequently cited in policy circles, making the government more cautious in decision-making.

Turning Signal of Policy Positioning: Global Reference Example

Although if the UK government really auctions Bitcoin, it may bring short-term selling pressure to the market, it is reasonable to estimate that the buyers will mostly be institutions, which may be more willing to hold than the UK government, and the related liquidation process may become a global reference model.

Germany previously sold nearly 50,000 Bitcoins (BTC), which did bring about a brief selling pressure, but after that was digested, BTC continued to rise. The German government originally intended to "avoid a significant loss in value," but ended up missing out on nearly $3 billion in potential gains after the coin price doubled. This lesson learned will undoubtedly make the UK government more cautious in handling this batch of Bitcoins.

How other countries define victims, how to auction, and how to avoid market crashes in the future can all draw templates from the UK experience. At the same time, this also means that Crypto Assets are rapidly embedding into the sovereign financial structure, and future government budgeting may include "digital confiscated goods" as available assets. This will be an important turning signal, indicating that governments' attitudes towards Crypto Assets are shifting from simple regulation to a more pragmatic asset management aspect.

The UK government's plan to auction 61,000 Bitcoins is not only an emergency measure to alleviate fiscal pressure, but also a microcosm of how governments around the world handle and utilize Crypto Assets. Although it may cause some psychological pressure on the Bitcoin market in the short term, in the long run, such events will encourage governments to establish more comprehensive mechanisms for handling Crypto Assets and may incorporate digital assets into their fiscal considerations. This auction, triggered by an "unexpected windfall," will become an important case in the history of cryptocurrency, providing valuable experience for future interactions between governments and Crypto Assets.