The Canadian government’s move to freeze the bank accounts of vaccine mandate protesters has brought into focus how much control governments can have over the financial system, leading to renewed interest in the privacy benefits of cryptocurrencies.
Truckers who have dubbed themselves the “Freedom Convoy” first started demonstrating last month over a rule requiring truckers returning from the United States to show proof of vaccination. The protests then morphed into more general protests against vaccine mandates and COVID-19 restrictions. Canadian Prime Minister Justin Trudeau decided to use the government’s financial surveillance infrastructure to hit back.
Trudeau invoked the Emergencies Act for the first time. The act gives the Canadian government broad powers over the protesters and the authority to freeze personal and corporate bank accounts. The government also broadened its anti-money laundering regulations to target crowdfunding sites that have been working to support the truckers.
Trudeau went after not only the protesters’ accounts but also those of people who assisted them financially.
National police on Sunday said that 219 “financial products” had been frozen and that a bank had frozen $3.8 million Canadian dollars held by a payment processor, according to the New York Times. While those accounts are now being unfrozen, the use of the sweeping power was eye-opening to some.
Neeraj Agrawal, director of communications at Coin Center, a Washington organization focused on cryptocurrency policy, told the Washington Examiner that the Canadian crackdown is shocking because such measures are rarely seen being done by Western governments with democratically elected officials.
Freedom of speech and financial freedom are related, Agrawal said. The freedom to transact is part of freedom of speech because without financing, it is difficult to demonstrate, organize, and speak up.
But the Canadian government didn’t just go after traditional bank accounts. It also tried to rein in cryptocurrency financing.
The Canadian government, and governments more generally, don’t have the ability to freeze an individual’s Bitcoin or cryptocurrency address without obtaining the owner’s private keys. That’s because crypto operates on a blockchain, a digital public ledger that allows for transactions to occur peer-to-peer rather than through an intermediary that maintains a ledger, such as a bank.
The government does, though, have the ability to go after third-party platforms that facilitate cryptocurrency transactions, such as exchanges.
Shidan Gouran is a Canadian early investor in Bitcoin and an expert on cryptocurrencies. Gouran said that while he is proud of the way his country has handled the pandemic in a general public health sense, he is disappointed with the financial crackdown and emphasized the desire to decentralize finance.
Gouran said that he wouldn’t expect any third-party exchange companies, despite ethical qualms, to push back when governments come after their users given the nature of the financial services industry.
“There are no third parties, virtually anywhere in the world, that wouldn’t comply with Canada or any other powerful Western nation,” he told the Washington Examiner. “The banking system, globally, is highly unified, and it would be suicide for that business to deny any request by a Western government. Whether they are domiciled in the Seychelles or Canada itself, they would comply.”
For example, amid the financial services crackdown, centralized crypto exchanges such as Kraken were forced to comply.
Jesse Powell, the CEO of Kraken, took to Twitter to encourage those concerned about the crackdown to take their funds off the exchange and only conduct peer-to-peer trades.
Centralized exchanges operate under required “Know Your Customer” procedures, so if governments ask them to freeze the assets of those users, they must comply.
“100% yes it has/will happen, and 100% yes, we will be forced to comply. If you’re worried about it, don’t keep your funds with any centralized/regulated custodian. We cannot protect you. Get your coins/cash out and only trade p2p,” Powell remarked on the crackdown, using a term for “peer-to-peer.”
Coinbase CEO Brian Armstrong also weighed in. “Concerning to see stuff like this happening in any country, especially such an economically free place like Canada. Self-custodial wallets are important!” he said.
Nunchuk, a self-custodial bitcoin wallet and software provider, provided an example of how transactions that don’t run through third parties are safer from government surveillance. The company said that after a court sent it an injunction to freeze and disclose information about assets involved in the protests, it mocked the request.
“We are a software provider, not a custodial financial intermediary,” the company clarified in response to the request. “We do not collect any user identification information beyond email addresses. We do not hold any keys.”
The Nunchuk team went on to say it doesn’t have the ability to “freeze” user assets or “prevent” them from being moved. They said that, by design, the company has no knowledge of its users’ assets.
“Please look up how self custody and private keys work. When the Canadian dollar becomes worthless, we will be here to serve you, too,” the company added cheekily.
Peter St. Onge, a research fellow for economic policy at the Heritage Foundation, said that self-hosting — that is, a wallet controlled by the owner of crypto assets rather than hosted by a third party — provides greater resistance to government overreach.
“Self-hosting is the fundamental competition to Coinbase or Kraken, so those two CEOs were making those statements out of a commitment to freedom. That would not be a business strategy to talk up the benefits of not using your product,” St. Onge told the Washington Examiner.
The U.S. has the technical ability to engage in the same form of crackdown as Trudeau and Canada did.
Agrawal said the Canadian crackdown has likely made it clearer to some that cryptocurrency is essentially the one alternative to hard cash that can be kept out of the gaze of financial surveillance.
“That’s why Bitcoin and cryptocurrencies are so important, because they allow people to transact outside of this sort of panopticon internet money system that we have so far,” he said.
Agrawal said there has been a long-running ethos in the cryptocurrency community to push the “not your keys, not your coins” line, essentially saying that if you keep your cryptocurrency with a company, it belongs to them and they can prevent you from accessing it.
“I think that this [crackdown] underlines that message that much more,” Agrawal said.
Original Location: Canadian crackdown on truckers highlights privacy benefits of cryptocurrency
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