Chancellor Rachel Reeves may be in line for a significant financial boost as the UK government looks to offload billions of pounds worth of seized cryptocurrency. The Home Office is collaborating with police forces to establish a secure system for storing and selling digital assets, including Bitcoin, potentially easing the strain on public finances.
This move comes as Reeves faces a projected £20 billion fiscal gap in the autumn budget, driven by high borrowing costs, stubborn inflation, and slow economic growth. The possible crypto windfall could serve as a temporary lifeline, especially after Labour U-turns on welfare and energy subsidies.
Law enforcement has already seized large quantities of cryptocurrency, although the full extent remains undisclosed. A single 2018 raid uncovered 61,000 Bitcoins linked to a Chinese fraud ring, which have since soared in value to over £5.4 billion. Bitcoin prices recently peaked at $123,000, a 20-fold increase from the time of the seizure.
Rising interest in digital currencies, bolstered by pro-crypto policies in the U.S. under Donald Trump—including the passing of the Genius Act—has pushed cryptocurrency further into the financial spotlight. Reform UK leader Nigel Farage has advocated for a national Bitcoin reserve, echoing Trump’s stance, but Labour has rejected the proposal, citing volatility concerns.
A proposed “crypto storage and realisation framework” would centralise the storage and liquidation of seized digital currencies. The initiative is being developed by BlueLight Commercial, the Home Office’s procurement body, with an estimated contract value of up to £40 million, paid on a commission basis. However, progress has stalled due to a lack of acceptable bids, though the plan is expected to continue in some form.
Typically, proceeds from seized assets are divided between law enforcement and central government if victims cannot be repaid. In the 2018 Bitcoin case, victims of the Chinese scam have requested the funds be returned, but that process remains unresolved.
Experts believe the Treasury could be sitting on a digital treasure trove. Aidan Larkin, CEO of Asset Reality, which specialises in managing seized assets, likened the situation to the UK’s “Norway oil moment.” He argues the government could reclaim hundreds of millions annually if it prioritises digital asset recovery.
Since 2019, £1.4 billion has been seized in criminal proceeds. Larkin believes this could double with a stronger focus on crypto-related crime.
Despite the potential gains, some warn of repeating past mistakes. Critics often cite Gordon Brown’s 1999 decision to sell off most of the UK’s gold reserves at a market low—a move that cost the country billions in lost value. Reeves now faces a similar dilemma: cash in on the current crypto boom or risk selling too early.
The complexity of managing seized crypto assets, including lengthy legal proceedings and asset maintenance, makes liquidation more difficult than seizure. Professor Michael Levi of Cardiff University notes that law enforcement often holds onto assets for years due to legal delays.
Still, momentum is building. While the Treasury officially claims it holds no Bitcoin, insiders suggest it is monitoring developments closely. If the government were to retain even part of the 2018 Bitcoin haul, it could inject up to £2.6 billion into the Treasury—roughly half the cost of Labour’s recent welfare policy reversal.
As pressure mounts on the Chancellor to find new revenue streams, Bitcoin may offer a tempting, albeit risky, solution. Whether Reeves can strike the right balance—or fall into the same trap as her predecessors—remains to be seen.
