Following a rise in crypto-related crimes, federal law enforcement is seizing a lot of crypto assets. Now the US government has hired a cryptocurrency firm to hold all its Bitcoin seizures.
This week, Anchorage Digital, a small crypto safekeeping platform, revealed its contract with the Department of Justice to store and liquidate digital assets that federal law enforcement seizes by criminal investigations. Simply put, the government has hired a crypto bank to store and sell forfeited cryptocurrency billions of dollars worth in Bitcoin and Ethereum. San Francisco-based Anchorage Digital is an obvious choice because it was the first federally chartered bank for crypto.
“There’s no traditional bank that actually offers these services because this is extremely complex from a technical perspective,” said Diogo Monica, Anchorage’s co-founder and president, in an interview with Recode. “It’s very hard to store these safely. In fact, there are many, many stories of people losing access to their Bitcoin and other cryptocurrency wallets and just losing access completely to them without the ability to be recovered.”
As digital assets go mainstream, they’re also becoming popular with criminals. That’s why, as the US Marshals Service shut down illegal crypto operations, from ransomware schemes to illegal online markets, they could collect a huge amount of various cryptocurrencies. Therefore, the US government might become a major player in the crypto market in the coming years.
Earlier reported, the FBI seized this June about $2.3 million worth of Bitcoin obtained after tracking the ransom payment associated with the recent Colonial Pipeline cyberattack. This followed the agency seized about $1 billion in cryptocurrency belonged to Ross Ulbricht, creator of the online black market Silk Road, which closed in 2013.
By the words of Ari Redbord, a former prosecutor and the GR head at TRM, a crypto fraud detection startup: “There’s no differentiation here between crypto and an oil tanker, for lack of a better example, or car or fiat currency when it comes to how it will ultimately be used in an asset forfeiture regime.”
The US Marshals Service is the agency in charge of holding and auctioning off many seized assets, including art, rare collectibles, and real estate. Since 2014, the DOJ’s asset forfeiture program has does the same with cryptocurrency and opened up the crypto stores for the public. But since 2019, the Marshals Service was looking for more help managing all these digital assets as cryptocurrency markets can be extremely volatile.
“Pricing, how to price them, how to evaluate it, how to liquidate it, how to safe keep it — people are being forced to deal with the asset class because it’s so prevalent now,” said Monica of Anchorage.
While the DOJ struggles to manage digital assets, calls for tighter regulations on cryptocurrency are coming from Washington cabinets. Thus, Sen. Elizabeth Warren (D-MA) said that cryptocurrencies should face tighter rules, while some senators proposed taxing cryptocurrency transactions to fund President Joe Biden’s infrastructure plan.
Although despite regulators’ and lawmakers’ efforts against cryptocurrencies, their growing popularity is forcing the government to adapt. According to the recent survey from NORC, a research institute at the University of Chicago, 13% of people in the US traded cryptocurrency last year versus 50% that have invested in the stock market.