Australia to auction £8m bitcoin
Ernst & Young is organising the auction of the seized bitcoins Reuters

A total of 24,518 bitcoins that were confiscated by Australian police will be auctioned off in June. The digital currency worth about £8m ($11.7m) will be sold in blocks of 2,000, with each (block) having a market value of £680,000.

Police in the state of Victoria seized the bitcoins in 2013 from a Melbourne drug dealer. Later in 2015, the Victoria's Asset Confiscation Operation (ACO) confirmed it had taken possession of 24,518 bitcoins and would try to make the most of it.

The auction is organised by audit firm Ernst & Young. The digital currency is being auctioned in parts as selling thousands of them to together could leave an adverse affect on the market.

Speaking to BBC Garrick Hileman, economic historian at the Cambridge Centre for Alternative Finance said, "This is a significant amount of Bitcoin. It's about a week's worth of new Bitcoin that comes onto the market through mining."

According to Hileman, Australian authorities have chosen a safe time to sell the currency as there is some uncertainty about the value of bitcoin in July.

"Generally the view is that any time 10,000 bitcoins sell, the market price can be moved significantly. The Bitcoin protocol is designed to reduce the number of new bitcoins miners are given as a reward for processing transactions every four years," said Hileman and added, "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."

Bitcoin sale first in Australia

The bitcoin auction in Australia would take place in the open market and will be the first such sale outside of the US. In 2014, the US Marshals Service auctioned about 175,000 bitcoins confiscated from the founder of Silk Road. The final auction then attracted 11 bidders.

"Any time a government sells Bitcoin, it is acknowledging that this is a different asset to drugs, for example, that would not be sold at an auction," said Hileman. He suggested that the sale of the bitcoins means the currency is legal in Australia.

He explained, "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."