Recently, global media have reported that Germany sold hundreds of millions of dollars of Bitcoin, causing market turmoil and a sharp sell-off in cryptocurrency prices. The truth is not so simple and direct - in fact, it was a small German state, Saxony, that was carrying out its statutory duties.

First of all, let’s clarify that it was not the German federal government that directly participated in the Bitcoin sell-off, but Saxony, a state in eastern Germany, that became the protagonist of this incident. Secondly, although this move has caused a strong reaction among cryptocurrency enthusiasts, who believe that it is a great disrespect for “digital gold”, Saxony is actually helpless.

Earlier this year, the Saxony State Criminal Police Office, LKA, seized nearly 50,000 bitcoins from the operator of the Movie2k.to website in an operation to combat money laundering and other illegal activities. The bitcoins are assets seized during criminal investigations and are subject to standard procedures for liquidation.

About a week ago, a cryptocurrency wallet belonging to the German Federal Criminal Police Office, or BKA, began transferring thousands of bitcoins to major exchanges including Kraken, Coinbase and Bitstamp, a move that clearly conveyed its intention to sell. As of now, the bitcoin inventory in the wallet has dropped sharply to 23,788, sparking widespread discussion and strong reactions on social media.

This incident not only reveals the important role of cryptocurrency in law enforcement actions, but also reflects that under the legal and financial regulatory framework, even digital assets that are regarded as the currency of the future cannot escape the constraints of the traditional legal system. For the cryptocurrency market, this is undoubtedly a profound revelation, reminding all participants that no matter how enthusiastic the market is, compliance and supervision are always indispensable cornerstones.

The usual process for handling seized assets in criminal investigations was followed, one expert explained.

The Saxony State Prosecutor's Office is responsible for the liquidation of confiscated assets, so the sell-off is not surprising. Dr. Lennart Ante, co-founder and CEO of the German Blockchain Research Lab, said, "Confiscated assets are usually liquidated within a certain period of time. This is a normal business process, although the scale of this is larger than before."

The wallet belongs to Germany's Federal Criminal Police Office (BKA) rather than the state of Saxony itself, perhaps because the BKA played a key role in the initial investigation and has the technical capabilities to handle such a large amount of Bitcoin, he speculated. However, the BKA does not have decision-making power and only acts on the instructions of the state government.

Normally, confiscated assets can only be transferred or sold after a judge rules that the state government is allowed to dispose of them, and the proceeds go into the state budget. But in this particular case, this process was not followed. However, if the value of the assets may depreciate rapidly or it is difficult to preserve, the state government can apply for an emergency sale, Dr. Ante gave an example of this.

In the case of Bitcoin, its high volatility at least serves as a logical argument for emergency selling, he added.

There are signs that Saxony has encountered challenges in trying to sell too much Bitcoin at once. On Tuesday, the state recovered $200 million from some exchanges, suggesting that there was insufficient demand for such a large amount of Bitcoin. This incident not only reveals the complexity and uncertainty of the cryptocurrency market, but also prompts us to think more carefully about how to manage and dispose of assets in a rapidly changing financial environment.

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