Most people may not realize it, but the UK owns more than £3 billion worth of Bitcoin.
Due to criminal seizures, the Government now faces the dilemma of what to do with this digital asset.
Twenty-five years after then-Chancellor Gordon Brown’s infamous sale of the nation’s gold reserves, can Rachel Reeves avoid repeating the mistake of underselling public assets?
How Did the UK Acquire £3 Billion in Bitcoin?
In the summer of 2021, a former takeaway worker, Jian Wen was arrested for allegedly acting as a “front person” for an investment scam in China. Convicted of money laundering, over 61,000 Bitcoins were seized from her criminal enterprise.
When the Bitcoin was seized, it was worth £1.4 billion. However, due to Bitcoin’s notorious price volatility, the value has now surged to £3 billion, with the price of a single Bitcoin more than doubling from just over $30,000 to around $65,000.
Earlier this year, the Crown Prosecution Service obtained a property freezing order against Ms. Wen, meaning the cryptoassets are now held by the Government. A civil recovery process is underway to prove the Bitcoin was illegally acquired. If successful, Ms. Wen will forfeit the assets, allowing the British Government to decide their fate.
Germany, another nation with a large cryptocurrency reserve, recently sold 50,000 Bitcoin worth approximately $3 billion (£2.3 billion), mostly seized from criminals. This mass sell-off contributed to Bitcoin’s price slump from $65,000 to $55,000 in late June, though it has since recovered.
Rachel Reeves may soon have the opportunity to follow Germany’s example and bolster the nation’s finances by selling its newly acquired cryptoassets—but should she?
Gordon Brown’s 1999 Gold Sale at Historic Lows
In 1999, Gordon Brown decided to sell 56% of the UK’s gold reserves—400 tonnes—at an average price of $275 an ounce, totalling approximately $3.5 billion. The timing was poor, as gold prices had steadily declined from their 1980 peak of $686.50. Experts warned that the price was relatively low and could quickly recover—and it did. By the mid-2000s, the price had already doubled.
Today, gold’s price is around $2,470 an ounce, nine times higher than what Gordon Brown sold it for. If he had held onto the 400 tonnes he sold, they would now be worth $31.5 billion, or over £24 billion. This would provide the current Labour government with nearly £5 billion extra each year during its term.
Given this hindsight of a catastrophic error by one Labour chancellor, would it be wise for another to learn from this mistake and hold onto the vast Bitcoin reserve that has unexpectedly come into her possession?
Should the Government Hold Some Bitcoin?
While selling Bitcoin at its current high price seems wise, completely offloading it could be shortsighted. For many who have held Bitcoin since its inception in 2009, the investment has been profitable, with the currency currently about 10% below its all-time high.
Some investors believe Bitcoin’s rally is just beginning. The asset is scarce by design, with a maximum supply of 21 million, of which almost 20 million are already in circulation. Bitcoin “miners” earn the currency by providing computing power to maintain the blockchain, a public ledger of transactions.
The reward for miners is halved every four years in an event known as the “halving,” which typically leads to a rise in Bitcoin’s value.
Predicting Bitcoin’s future price with certainty is impossible. However, given the crypto asset’s resilience over the past decade and the harsh lessons learned by previous chancellors who acted too hastily, retaining even a small portion of the Bitcoin the Treasury may soon possess could prove to be a brilliant move in the future.
