{"id":49253,"date":"2025-03-03T18:22:11","date_gmt":"2025-03-03T18:22:11","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=49253"},"modified":"2025-03-03T18:22:11","modified_gmt":"2025-03-03T18:22:11","slug":"bitcoin-reserves-and-the-incentives-of-civil-asset-forfeiture","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=49253","title":{"rendered":"Bitcoin Reserves And The Incentives Of Civil Asset Forfeiture"},"content":{"rendered":"

Bitcoin Magazine<\/a><\/p>\n

Bitcoin Reserves And The Incentives Of Civil Asset Forfeiture<\/a><\/p>\n

<\/div>\n

Yesterday, President Trump announced the long awaited Strategic \u201cBitcoin\u201d Reserve on Truth Social, and many in the space are pissed.<\/p>\n

First, the Reserve appears to be far from Bitcoin only. \u201cThey\u2019re doing DEI for Charles Hoskinson,\u201d former CoinDesk Chief Insights Columnist David Z. Morris wrote on X<\/a> \u2013 Hoskinson\u2019s Cardano (ADA) was announced to be included in the Reserve. \u201cCut cancer research to buy Cardano,\u201c another user posted<\/a>.\u00a0<\/p>\n

Others take issue with possible investment interests surrounding the Trump administration: Trump\u2019s announcement is \u201ca new level of corruption,\u201d wrote<\/a> communications strategist Derek Martin, detailing David Sack\u2019s investment in Bitwise. \u201cYou get exit liquidity and you get exit liquidity everybody gets exit liquidity\u201d posted<\/a> Bitcoin Policy Institute fellow Troy Cross alongside a picture of Oprah. (Sacks has since stated<\/a> that he has sold all of his cryptocurrency holdings).<\/p>\n

What all of these criticisms have in common is that they completely miss the point. Whether the Reserve is composed of additional coins, or may serve nefarious interests of the administration, is of little actual consequence for those holding Bitcoin.<\/p>\n

What is very much of consequence, is the question of how said Reserve would be funded. On the one hand, many are speculating that the US may divert taxpayer funds to purchase cryptocurrency \u2013 a proposal that inevitably would have to go through Congress \u2013 which seems unlikely, as Trump is rumoured<\/a> to make a new announcement on \u2018investments\u2019 today.<\/p>\n

Another, much more likely approach, as already outlined<\/a> in Trump\u2019s Executive Order to \u201cStrengthen American Leadership in Digital Financial Technology\u201d, is that the Reserve would be \u201cderived from cryptocurrencies lawfully seized by the Federal Government through its law enforcement efforts.\u201d<\/p>\n

That\u2019s fine, you\u2019ll say, because I\u2019ve obtained all of my bitcoin legally and have never, nor will I ever, engage in criminal activity. And that\u2019s precisely where you are wrong.<\/p>\n

Bitcoin that is \u201clawfully seized by the Federal Government\u201d does not just include bitcoin derived through criminal prosecutions. Bitcoin can additionally be lawfully seized through a process called Civil Asset Forfeiture: a funny little game that the Government plays in which it doesn\u2019t have to accuse you of a crime, but can instead accuse the thing itself<\/em> of a crime.\u00a0<\/p>\n

As Cato Institute has outlined in a post<\/a> calling for the reform of Civil Asset Forfeiture law, New York police routinely seize cars used in a DUI, and in Florida, police regularly seize cash excess of $100 suspected to be used to purchase illegal substances. In the most striking example, Cato highlights a case from Philadelphia, in which police tried to seize a grandmother\u2019s house and car because, without her knowledge, her son sold less than $200 worth of marijuana from the house. In Philadelphia alone, civil asset forfeiture was so astonishingly abused, that the City seized over 1,000 homes, over 3,000 vehicles, and over $44 Million in cash over an 11-year period.<\/p>\n

The problem with civil asset forfeiture is that it reverses the burden of proof. Instead of being guilty until proven innocent, it is up to the asset\u2019s owner to prove that the property seized wasn\u2019t used \u2013 or wasn\u2019t intended<\/em> to be used \u2013 in a crime. The cost of such litigation is what makes civil asset forfeiture close to impossible to fight.<\/p>\n

While the Government could have \u2013 and has \u2013 applied civil asset forfeiture to cryptocurrencies, which usually stand out in court documents by their titles alone, such as United States v. Binance Account 188746, it never really had a strategic interest in applying it more broadly. The Bitcoin would be seized and forfeited to the Government, but the Government would have to end up selling it for dollars anyway.<\/p>\n

If we take Trump\u2019s Executive Order at face value, this may now change, giving the Government an incentive to apply civil asset forfeiture to bitcoin more broadly.<\/p>\n

This is a problem, as we can likely trace a lot of bitcoin back to having touched a sanctions evasion, a darknet market, or other alleged illicit activity. The question then becomes: how many hops back do we go? How many UTXOs do we unravel to find it legitimate that bitcoin coming out of potentially illicit activity is seized on behalf of the Government to help build its Strategic Reserve?<\/p>\n

The other problem is that, if the Government accuses the bitcoin you hold of having been involved in the facilitation of crime, you may have obtained said bitcoin fully legally, had nothing to do with the alleged criminal activity, and don\u2019t even need to have been aware of it \u2013 the Government may still, fully legally, take your bitcoin away from you.<\/p>\n

Taking Trump\u2019s Executive Order at face, it seems that cheering on the Strategic Bitcoin Reserve may not be the smartest move until it is clarified that civil asset forfeiture will not be employed to further the Reserve. After all, it is a concept that should be reformed, and not encouraged.\u00a0<\/p>\n

This is a guest post by L0la L33tz. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.<\/em><\/p>\n\n

This post Bitcoin Reserves And The Incentives Of Civil Asset Forfeiture<\/a> first appeared on Bitcoin Magazine<\/a> and is written by L0La L33Tz<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Bitcoin Magazine Bitcoin Reserves And The Incentives Of Civil Asset Forfeiture Yesterday, President Trump announced the long awaited Strategic \u201cBitcoin\u201d Reserve on Truth Social, and many in the space are pissed. First, the Reserve appears to be far from Bitcoin only. \u201cThey\u2019re doing DEI for Charles Hoskinson,\u201d former CoinDesk Chief Insights Columnist David Z. Morris […]<\/p>\n","protected":false},"author":0,"featured_media":49254,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-49253","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-discovery"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/49253"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=49253"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/49253\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/49254"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=49253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=49253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=49253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}