🔒 Britain's $5bn Bitcoin stash ready to be unleashed

Rachel Reeves, the UK’s new Chancellor of the Exchequer, faces daunting challenges. To rebuild Britain, she may tap into the country’s significant Bitcoin holdings, which could provide much-needed funds without raising taxes. However, she must avoid the pitfalls of past asset sales, like Gordon Brown’s infamous gold sell-off. Smartly managing these digital assets, while navigating crypto regulations, will be crucial for Reeves’ financial strategy and legacy.

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By Merryn Somerset Webb

Rachel Reeves is going to need some money. The UK’s new Chancellor of the Exchequer has inherited, she says, one of the worst sets of circumstances since World War II. Meeting her goal to “rebuild Britain and make every part of our country better off” won’t be cheap. But there’s a pile of cash conveniently available that won’t involve raising taxes — Britain’s Bitcoin holdings. ___STEADY_PAYWALL___

With Donald Trump looking increasingly likely to beat Joe Biden in the US presidential election, investors have been racing to buy potentially Trumptastic assets. The list includes smaller US companies that should benefit from a bit of protectionism, European defense companies in anticipation of increased domestic military budgets, US energy companies — and, so far at least, Bitcoin. The Republicans seem keener on cryptocurrencies than Biden (although the sector has still done stormingly well under his tenure). Their platform published earlier this month suggests that crackdowns on coins are “unlawful and un-American.” Trump’s new running mate JD Vance is definitely a fan; his most recent financial disclosure shows him owning about $100,000 worth. So it’s little wonder that Bitcoin is up more than 10% since the assassination attempt on Trump, which means anyone who owns Bitcoin has enjoyed an increase in wealth.

Reeves has Bitcoin. According to BitcoinTreasuries.net, governments now own about$31 billion worth of Bitcoin — and a reasonable chunk of that belongs to the UK. Earlier this year, the Crown Prosecution Service convicted and sentenced former takeaway worker turned international money launderer Jian Wen. The service also obtained a property freezing order against her assets – including Bitcoin valued at around £2 billion at the time. Accountants at RSM UK cite figures from crypto intelligence firm Arkham saying the UK now owns 61,245 Bitcoins, most of which once belonged to Wen and which are now worth around £3.9 billion ($5 billion). The money isn’t in the bag quite yet; the UK has to go through a civil recovery process to prove that Wen’s assets were obtained illegally and should therefore be forfeited to the state, says RSM. Crime proceeds are typically split between the police and the Home Office; the scale of the haul makes it likely that Reeves will have the final say.

The first thing Reeves will think about as she contemplates tapping those billions will be the decision of one of her predecessors, Gordon Brown, to sell the UK’s gold holdings. Between 1999 and 2002, he offloaded 401 tons at an average price of $275 an ounce. At the time, it probably felt just fine to him. Other central banks had been selling. Amid fiat money and dotcom booms, gold seemed a little pointless. Its price kept falling and, in a world of super confident central bankers, its value as a diversifier had long been forgotten. “Who needs gold when you have Greenspan?” asked the New York Times in 1999. Brown raised around $3.5 billion from the sales.

However, it wasn’t fine. Not fine at all. It turned out to be one of the worst trades in the history of markets. Between the beginning of 1980 and the commencement of the UK program in July 1999, gold had slumped by 60%. But the sales marked the end of a 20-year bear market; in the following three years the yellow metal rallied by 20%. This week, 25 years on, it set a new record, topping $2,480 an ounce. Much of the demand has come from central banks rebuilding their gold reserves. Brown will forever by viewed as the guy who sold at the very bottom of the market.

That’s not the kind of legacy Reeves will want — but she should still sell the UK’s crypto holdings. The comparison with Brown is history barely rhyming. Bitcoin is still not a currency, isn’t an established asset class and is unlikely to become part of the Bank of England’s reserves. Regardless of where the price might or might not go, it isn’t the job of the chancellor or the Treasury to take a punt on the future value confiscated assets. They should no more hold seized Bitcoin to see what happens than they should set up an account at Airbnb for confiscated Mayfair mansions or one at the Watch Lending Club for their cache of drug-dealer Rolexes.

Reeves should sell, take the cash and pay for a few quick wins. However, she might want to sell rather better than Brown did — he advertised the plan in a remarkably naïve way, all but guaranteeing the lowest possible price along the way. She should also bear in mind Germany’s recent experience; according to Arkham figures cited by rsm, the German government sold nearly 50,000 Bitcoins since the middle of June, and may have been partly responsible for pushing the price down by 15% in the pre-Trump trade weeks.

She might also forestall the mockery of the tech bros — who make a painfully big deal out of why everyone should HODL to Bitcoin — by relaxing crypto regulations. Bytecoin’s Charlie Morris reckons the UK regime “is the most anti crypto in the west,” so allowing a liquid closed-end fund for retail investors to trade Bitcoin would be both great for the London Stock Exchange (although the jury is obviously still out on whetherit’s a good long-term investment for retail buyers) and a signal that the new government is at least something of a tech ally.

One last thing for Reeves to note: As long as international criminals keep using Bitcoin and the police keep catching them, more crypto will likely come her way. Gordon Brown had no such source of comfort. These days, it’s central bankers, not criminals, who hold all the gold.

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