HomeLatest NewsDoes the FBI Bitcoin Auction Legitimise Cryptocurrency?

Does the FBI Bitcoin Auction Legitimise Cryptocurrency?

December 3, 2014 By Claire Broadley

Despite it’s legitimate uses, with 2014 seeing large companies including Overstock, Dish & Expedia beginning to accept Bitcoin, for some it is still renowned as a currency of the black market – or, to put it in modern terms, the ‘dark web’.

The FBI has been involved in seizing tens of thousands of bitcoin, worth millions of dollars, when these dubious enterprises have been uncovered. Its auctions offer interested parties the chance to cash in on its virtual raids, but they could be giving the currency an unexpected PR boost.Silkroadnotice

Tomorrow (December 4) it will auction 50,000 BTC originally owned by Ross Ulbricht, or Dead Pirate Robert, the man behind the original Silk Road marketplace who was arrested in October, 2013 for a number of alleged crimes including drug trafficking, money laundering and hacking. The FBI is selling 20 blocks, each containing 2,000 or 3,000 per block. The minimum deposit is $100,000.

The auction won’t offer many surprises. We’ll see the same bidders that cashed in the first time, including Mirror, Pantera and Binary Financial. Many participants are putting syndicates together in order to increase bidding power. Tim Draper, the winner of the first auction in June who purchased 30,000 has already stated that he’ll be bidding again.

These auctions represent an interesting turning point for bitcoin. The FBI clearly recognises that the cryptocurrency has value, and it arguably sees the positive PR in taking assets from notorious users of the dark web. But the involvement of the US government also has another effect: it makes bitcoin seem a little more valuable, and a little safer.

All of the blind bidders in its auction have to pass stringent ID checks, pay a large deposit and complete a comprehensive registration form. The FBI then vets each potential bidder and manually approves their participation.

The FBI confiscated a staggering 144,000 bitcoins from Ross Ulbricht, and it obtained authorisation to sell this 50,000 segment back in January. We’ll see at least one more auction if Ulbricht loses his court case, although we may be waiting some time for the final decision.

Tomorrow’s auction has seen significantly less media attention than it’s predecessor and there are sign that investors are beginning to lose interest, aware that there are further blocks that they’ll be able to purchase at a later date, but with NYC’s Bitlicense and high profile ETFs set to launch in early 2015, further legitimising cryptocurrencies, will this be the last chance for large buyers to  grab themselves a bargain?