The U.K. Has $7B of Bitcoin. What Will Happen to It?

The U.K. government has a problem right now. A “fiscal black hole” has emerged in the country’s finances, meaning a series of controversial cutbacks are being made. There are also fears that taxes — already at high levels — may rise further.

But several proposals designed to save money, including cuts to winter fuel payments for pensioners and tightened criteria for welfare, have had to be abandoned in humiliating climbdowns for the Labour Party.

Chancellor Rachel Reeves, or finance minister if you like, has warned she needs to find many billions of pounds to balance the budget. But some British commentators have been left scratching their heads at some of the decisions she’s making.

Data from Arkham Intelligence suggests that the U.K. government currently owns more than 61,000 BTC — funds that have been primarily seized from criminals. With Bitcoin recently accelerating to fresh all-time highs above $120,000, this is a warchest that’s now worth a cool $7.2 billion at the time of writing.

Whereas Donald Trump has previously vowed that the Bitcoin seized in the U.S. would be rolled into a strategic reserve, meaning future price rises will benefit taxpayers, a similar policy in Britain has been ruled out altogether.

The Treasury — which manages the country’s finances — has said: “Bitcoin and other crypto assets have been historically volatile relative to stable fiat currencies like the U.S. dollar and commodities, such as gold. This volatility makes BTC less suitable as a reserve asset for the U.K.”

No ambiguity there. Even so, there has been no confirmation that the government is planning to convert any of this stash into fiat — and follow in the footsteps of Germany, which ended up missing out on billions after dumping 50,000 BTC on the crypto market last year.

Liquidating this BTC would pay for the reversal to winter fuel payments many times over — and more than cover the impact of keeping eligibility criteria for benefits unchanged among existing claimants.

Chris Etherington, a partner at RSM, recently argued that a selloff could prove advantageous for the British economy in the short-term. However, he went on to warn that timing is everything, and Reeves could end up ruing her decision if BTC continues to climb further in 2025. 

He went on to draw comparisons to former Labour chancellor Gordon Brown, who controversially offloaded vast amounts of U.K. gold holdings when the precious metal was at “the bottom of a two-decade bear market.” 

There are also geopolitical considerations to make. Most of the BTC seized had been swindled from Chinese victims, meaning that the Beijing government could demand that they are made whole first.

“Those hoping for a potential reprieve from future tax rises as a result of a crypto windfall may be disappointed by a protracted wait,” Etherington admitted.

Whereas the preceding Conservative Party was unashamedly pro-crypto, Labour hasn’t made its position on digital assets all that clear. 

And with Reform U.K. now topping opinion polls — led by Nigel Farage, who has called for a Bitcoin reserve to be established — the government may have little choice but to revise its policies soon.

 

Note: The opinions expressed in this column are those of the author and do not necessarily represent the views of FXCOINZ, its owners, or affiliates.