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Australia to sell £8m of seized bitcoins | Australia to sell £8m of seized bitcoins |
(about 3 hours later) | |
A collection of bitcoins worth about £8m, which had been confiscated by police in Australia, will be auctioned off in June. | A collection of bitcoins worth about £8m, which had been confiscated by police in Australia, will be auctioned off in June. |
The 24,518 bitcoins will be sold mostly in blocks of 2,000 - each with a value of about £680,000. | The 24,518 bitcoins will be sold mostly in blocks of 2,000 - each with a value of about £680,000. |
Ernst & Young, the firm organising the auction, said the bitcoins had been "confiscated as proceeds of crime" but did not elaborate on the case. | Ernst & Young, the firm organising the auction, said the bitcoins had been "confiscated as proceeds of crime" but did not elaborate on the case. |
One expert said the authorities had chosen a "safe" time to sell. | One expert said the authorities had chosen a "safe" time to sell. |
Australian newspapers have previously reported that 24,500 bitcoins were seized by police in the state of Victoria in 2013, after a man was arrested for dealing illegal drugs online. | Australian newspapers have previously reported that 24,500 bitcoins were seized by police in the state of Victoria in 2013, after a man was arrested for dealing illegal drugs online. |
In 2015, Victoria's Asset Confiscation Operations department "confirmed it had recently taken possession of 24,500 coins and would try to make the most of it", according to the Sydney Morning Herald. | In 2015, Victoria's Asset Confiscation Operations department "confirmed it had recently taken possession of 24,500 coins and would try to make the most of it", according to the Sydney Morning Herald. |
'Significant amount' | 'Significant amount' |
"This is a significant amount of Bitcoin," Dr Garrick Hileman, economic historian at the Cambridge Centre for Alternative Finance, told the BBC. "It's about a week's worth of new Bitcoin that comes onto the market through mining." | "This is a significant amount of Bitcoin," Dr Garrick Hileman, economic historian at the Cambridge Centre for Alternative Finance, told the BBC. "It's about a week's worth of new Bitcoin that comes onto the market through mining." |
Currently about 4,000 new bitcoins are generated a day, as a reward for "miners" who offer their computer power to process Bitcoin transactions. | |
The seized coins are auctioned in blocks because quickly selling a large number of coins for cash at a Bitcoin exchange could negative affect the market. | |
"Generally the view is that any time 10,000 bitcoins sell, the market price can be moved significantly," said Dr Hileman. | |
The price of bitcoin rose to $530 (£362) on Friday, its highest level since August 2014. | The price of bitcoin rose to $530 (£362) on Friday, its highest level since August 2014. |
Dr Hileman said the Australian authorities had chosen a "safe" time to sell because there is some uncertainty about what will happen to the value of Bitcoin in July. | Dr Hileman said the Australian authorities had chosen a "safe" time to sell because there is some uncertainty about what will happen to the value of Bitcoin in July. |
"The Bitcoin protocol is designed to reduce the number of new bitcoins miners are given as a reward for processing transactions every four years. | "The Bitcoin protocol is designed to reduce the number of new bitcoins miners are given as a reward for processing transactions every four years. |
"The reward will be halved on 14 July, so prices could go up due to the reduced supply of new bitcoins. | "The reward will be halved on 14 July, so prices could go up due to the reduced supply of new bitcoins. |
"But there is a question about whether security could decline, if rewards for miners are reduced significantly. So it's a safe time to sell, as there is no guarantee about what might happen in July." | "But there is a question about whether security could decline, if rewards for miners are reduced significantly. So it's a safe time to sell, as there is no guarantee about what might happen in July." |
'Set a precedent' | 'Set a precedent' |
The Australian Bitcoin auction, which will be open to bidders worldwide, is the first such sale outside of the US. | The Australian Bitcoin auction, which will be open to bidders worldwide, is the first such sale outside of the US. |
In 2014, the US Marshals Service began auctioning a collection of about 175,000 bitcoins that had been confiscated from the founder of internet marketplace Silk Road. | In 2014, the US Marshals Service began auctioning a collection of about 175,000 bitcoins that had been confiscated from the founder of internet marketplace Silk Road. |
The final auction of those bitcoins attracted 11 bidders, possibly due to the high cost of each block on sale. | The final auction of those bitcoins attracted 11 bidders, possibly due to the high cost of each block on sale. |
Dr Hileman said the sale of Bitcoin by the Australian authorities was an acknowledgement that the cryptocurrency was not illegal. | Dr Hileman said the sale of Bitcoin by the Australian authorities was an acknowledgement that the cryptocurrency was not illegal. |
"Any time a government sells Bitcoin, it is acknowledging that this is a different asset to drugs, for example, that would not be sold in an auction," he told the BBC. | "Any time a government sells Bitcoin, it is acknowledging that this is a different asset to drugs, for example, that would not be sold in an auction," he told the BBC. |
"That was one of the big takeaways from the US Marshal Service auction - they set a precedent that Bitcoin was not illegal. | "That was one of the big takeaways from the US Marshal Service auction - they set a precedent that Bitcoin was not illegal. |
"Australia has been going through its own regulatory process - and this makes a standing that Bitcoin is legal to use in Australia." | "Australia has been going through its own regulatory process - and this makes a standing that Bitcoin is legal to use in Australia." |