US Marshals will auction rather than destroy seized Silk Road bitcoins

More than US$17 million in bitcoins seized from the Silk Road is planned for auction by the U.S. Marshals Service, affirming that the country’s law enforcement views the virtual currency like any other asset.

Slightly more than 29,656 bitcoins will be auctioned online on June 27 over a 12-hour period, according to a notice. Interested bidders must put up a $200,000 deposit, provide a government-issued ID and certify they’re not affiliated with alleged former Silk Road boss Ross William Ulbricht.

The law enforcement agency could have simply deleted the private encryption keys that allow the bitcoins to be transferred, effectively destroying $17.7 million worth of the virtual currency and casting doubt on its legitimacy.

But Bitcoin isn’t illegal in the U.S., and while traditional banks are staying far away from it, the move by the marshals to unload it like any other asset would appear to give Bitcoin some circumstantial weight.

One interesting detail is that qualified bidders are required to send the $200,000 deposit via a wire transfer from a bank within the U.S., meaning the transaction for the bitcoins will have to touch the traditional banking system. The backing by the U.S. Marshals, however, might give banks more confidence if they figure out the deposit is potentially Bitcoin-related.

The bitcoins came from six wallets affiliated with the Silk Road, the online marketplace for mostly illicit goods that was shut down in October 2013. Ulbricht, who is being held without bail, is scheduled for trial in November.

Ulbricht, who allegedly went by the online handle “Dread Pirate Roberts,” is fighting in court to reclaim part of a much larger batch of 144,342 seized coins, worth as much as $86.6 million.

The marshals will auction nine blocks of 3,000 bitcoins each and a tenth block with 2,656 coins. The deadline for registration is 12 p.m. EST on June 23, according to the agency.

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