Over the last week, there’s been a lot of discussion about Canada ‘freezing’ digital currency accounts that are associated with the Canadian trucker’s Freedom Convoy. It is important to stress that decentralized cryptocurrency like bitcoin or ethereum cannot be directly frozen within the network. The Canadian government has the ability to flag digital currency addresses, and ask centralized entities such as payment processors or crypto exchanges to block the funds.
Canadian Officials Can Flag Crypto Addresses and Threaten Exchanges, but They Can’t ‘Freeze Bitcoin’
Last week, the Canadian government and Prime Minister Justin Trudeau invoked the country’s Emergencies Act and enacted Canada’s terrorist financing policy in order to blanket cryptocurrencies donations. Trudeau and his government made this move to end the demonstrations in Ottawa.
The Canadian government managed to get Gofundme to shut down the Freedom Convoy’s fundraiser and it flagged 34 crypto addresses allegedly associated with crypto fundraisers. Reports had indicated that Canada’s police sent letters to banks and crypto-asset exchanges and insisted that companies “cease facilitating any transactions” with the aforementioned flagged addresses.
According to a variety of financial institutions, crypto companies and other sources, the Royal Canadian Mounted Police did indeed send the letters. A second report states that an Ontario Superior Court judge had ordered financial institutions in Ontario to immediately freeze assets related to Freedom Convoy, including digital assets.
The order reportedly derived from a “secret hearing” initiated by Ottawa residents and attorney Paul Champ. “I can confirm that this is the first successful Mareva order in Canada targeting bitcoin and cryptocurrency exchanges,” Champ explained to the press.
However, even though headlines are claiming that crypto assets will be frozen, this cannot happen without threatening enforcement or targeting off-ramps for crypto-to-fiat.
Yesterday the Ontario Superior Court of Justice issued us a Mareva injunction, directing us to disclose and freeze information regarding the assets that were involved in this case. #FreedomConvoy2022 movement.
This is the official reply. pic.twitter.com/iuxliXhN5y
— nunchuk_io (@nunchuk_io) February 19, 2022
You cannot freeze bitcoin addresses (BTC), or ethereum addresses (ETH) and make them useless. The only way to do that is by using force or threats of imprisonment or death and ultimately obtaining a crypto owner’s private keys. Fundraising, such as the BTC Fund that raised 21 Bitcoin, is a great way to do this. utilize multi-signature controls.
The software developers who created the bitcoin wallet Nunchuk were able to confirm that the Mareva injunction was issued to Nunchuk’s team. Nunchuk wrote backThe Ontario Superior Court of Justice was notified and informed that it would not be complying with the orders.
“Dear Ontario High Court Judge, Nunchuk is a self-defense, collaborative, multi-sig bitcoin wallet,” the Nunchuk team’s letter says. “We are a software provider, not a security finance intermediary. The software we offer is available for free. While protecting privacy, it helps people to eliminate single points of failure and save bitcoin as safely as possible.” Nunchuk’s letter adds:
Beyond email addresses, no other information is collected by us. No keys are available. So: ‘Our users’ assets cannot be disabled.’ ‘[We] Cannot “block transactions.’ We do not know the ‘presence, nature, value and location’ of our users’ assets. Learn how personal keys and self-defense work. If the Canadian dollar ceases to be worth anything, we are here for you.
Kraken’s CEO Jesse Powell: ‘We Cannot Protect You — Stick to Real Crypto’
Kraken’s CEO Jesse Powell explained on Twitter that if people are worried about getting their crypto funds frozen then they should not keep crypto on centralized platforms. Response to someone commenting about crypto exchanges freezing funds, Powell said that this was “100%” the case.
“100% yes it has/will happen and 100% yes, we will be forced to comply,” said Powell. “If you’re worried about it, don’t keep your funds with any centralized/regulated custodian. We cannot protect you,” Powell Tweeted. In a later tweetPowell suggested that it may not be possible to get on-chain top reserves tokens, such as stablecoins, without being a security risk.
“You’re not necessarily safe just going on-chain,” Powell said. “The top reserve tokens with centralized issuance and redemption, like USDT and USDC have centralized control of freeze functionality that can be commandeered as easily as a bank account. Stick to real crypto,” he added. In the past, both USDC and USDT issued currency issuances had frozen stablecoin addresses.
In July 2020, Circle’s Centre Consortium blacklisted $100,000 in USDC after getting a request from law enforcement. Tether has been able to blacklist hundreds of addresses in USDT and the company has frozen USDT worth $160million. So while digital currency exchanges, crypto payment processors, financial institutions, and banks can “cease facilitating any transactions” with crypto addresses, decentralized assets or “real crypto” cannot be commandeered unless the accounts’ private keys are taken by threats or physical force.
What do you think about Jesse Powell’s comments about exchanges not being able to protect you and his sticking with ‘real crypto’ statement? Please comment below to let us know your thoughts on this topic.
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