The Seizure of Bank Accounts
Bitcoin will be Politicized
On February 15th, the Canadian government invoked the Emergency Act for the first time since its establishment in 1988. Putting aside my political leanings, I am opting to speak about one specific facet of this unfolding event. That is, the freezing and/or seizing of bank accounts in relation to the Freedom Convoy Protest.
Earlier in 2021, I made a prediction that Bitcoin Will be Politicized. I’m following up on this prediction as I think that the events that are transpiring in real time is the beginning of the politicization of Bitcoin.
Bitcoin is Money; Money is Neutral
Before I dive into the contents of this article, I want to state my opinion on Bitcoin as it relates to being a funding mechanism for crime or anything else. Bitcoin is neither good nor bad. Like any tool, it is neutral.
I believe there will be a push to demonize bitcoin and other cryptocurrencies specifically for their properties of being able to resist censorship.
I urge you to resist this demonization of bitcoin and remind yourself that it is the people that are using the tool that are doing things you disagree with, not the tool they’re using to do it.
Invoking the Emergencies Act
I’ve linked a clip of the press conference where Justin Trudeau and the Minister of Finance announce the measures they’ve decided to impose. I’ve fast forwarded the clip to the Minister of Finance’s speech, but please go back and watch the whole thing if you please.
I’ve then transcribed her announcement, so that I can make specific comments about the measures they’re taking to combat the blockade. I’ve added paragraph breaks and “Points - 1” in the transcript so I address the statements with my thoughts.
Point - 1
“We are broadening the scope of the anti money laundering and terrorist financing rules so that they cover crowd funding platforms and the payment service providers they use. These changes cover all forms of transactions including digital assets such as cryptocurrencies.
Point - 2
The illegal blockades have highlighted the fact that crowdfunding platforms and some of the payment service providers they use are not fully captured under the proceeds of crime and terrorist financing act. Our banks and financial institutions are already obligated to report to the FINancial TRansactions and reports Anlaysis Center of Canada. (FINTRAC). As of today, all crowdfunding platforms and the payments service providers they use must register through FINTRAC, and they must report large and suspicious transactions to FINTRAC. We are making these changes because we know that these platforms are being used to support illegal blockades and illegal activity which is damaging the Canadian economy. The government will also bring forward legislation to bring these authorities to FINTRAC on a permanent basis.
Point - 3
Second, the government is issuing an order with immediate effect under the emergencies act authorizing Canadian financial institutions to temporarily cease providing financial services where the institution suspects that the account is being used to further the illegal blockades and occupations. This order covers both personal and corporate accounts.
Point - 4
Third, we are directing Canadian financial institutions to review their relationships with anyone involved in the illegal blockades and report to the RCMP or CSIS. As of today, a bank or other financial service provider will be able to freeze or suspend an account without a court order. In doing so, they will be protected against civil liability for actions taken in good faith.
Federal institutions will have a new broad authority to share relevant information with banks and other financial service providers, to ensure that we can all work together to put a stop to the funding of these illegal blockades. This is about following the money. This is about stopping the financing of these illegal blockades.
Point - 5
We are today serving notice. If your truck is being used in these illegal blockades your corporate accounts will be frozen. The insurance on your vehicle will be suspended. Send your semi-trailers home. The Canadian economy needs them to be doing legitimate work. Not to be illegally making us all poorer.” — Chrystia Freeland
Statement Analysis
Point 1
Cryptocurrency companies are already obligated to report large transactions to FINTRAC. However, I think these measures will force them to be held to a higher degree of scrutiny with respect to their reporting obligations.The point worth focusing in on here is that the reporting requirements are now extending to crowdfunding platforms.
Point 2
Again, the point being made here is that crowdfunding platforms are now going to be obligated to report large transactions to FINTRAC. They must report details on the transaction such as who sent it, the amount they sent, and who received it.
This is simply not possible in all situations. Tallycoin is one such crowdfunding platform that is built on Bitcoin. The sender is anonymous, and so is the receiver. So under these new legislations, the platform is illegal and can be shut down. But what if the platform cannot be shut down? More on this later…
Point 3
This is the first point that concerns me. The institution simply needs to suspect an account holder of furthering illegal activity. I could easily fall into this category, as I regularly send CAD to cryptocurrency exchange to buy bitcoin.
To be up front, transparent, and clear, I have not donated to the Trucker Convoy, nor do I intend to. Not in CAD, nor in BTC. But, that will not stop an institution from suspecting me, given my level of involvement with cryptocurrencies.
Both my personal account and my business bank accounts regularly transfer CAD to exchanges to buy Bitcoin. I think this is the danger of politicizing bitcoin. Just like we cannot blanket users of the Canadian Dollar as being criminals because criminals use the Canadian Dollar, we cannot blanket users of Bitcoin as being criminals for using Bitcoin.
I fear this is the direction we’re headed.
Point 4
Disclaimer: This is pure speculation. I think that users account activity will be reviewed by the relevant authorities in the coming days, weeks, and months. I sincerely hope that the Emergency Act does not last that long, but the longer it goes on, I suspect more drastic measures will be taken.
In the event that Bitcoin becomes a target, and is demonized by the Canadian Government, I give pause to caution under the possibility that my account will be frozen simply because I hold, buy, and promote Bitcoin.
The institutions are permitted to freeze and/or suspend the account without a court order, meaning that this freezing could take place without a moment’s notice.
Once they deal with the immediate and ongoing funding, they may begin to go back in time, and analyze old transaction data. Given that the statement about who’s accounts can be frozen is vague, and the institution may freeze accounts on suspicious, I don’t think my caution is unwarranted.
Point 5
The last point that I’d like to make is just pointing out the irony in the Finance Minister’s last statement. “The Canadian economy needs them to be doing legitimate work. Not to be illegally making us all poorer”.
The irony here is that inflation in Canada is a hidden tax that makes everyone holding dollars poorer. It is one of the biggest drivers of wealth inequality. The only caveat here is that inflation is legal. So when the central bank makes the Canadian people poorer through inflation its okay, but when the truckers do it, it’s illegal?
Bitcoin will be Politicized
I think all of this will culminate in the politicization of Bitcoin. Bitcoin may become conceptually linked with the political right, and thus inherit the supposed morality of “right wingers”.
We run the risk of politicizing a tool that is used by people from all walks of life. The risk here is imposing political values onto people that use a tool, rather than allowing them to speak for themselves. One cannot assume anything political about someone, simply on the basis of which money they choose to use.
Nonetheless, I knew the day would come wherein bitcoin would affront the objectives of some government around the world; I just didn’t think it would be Canada. I think the aspects of bitcoin that is most controversial and problematic for the Canadian government at this time, is its censorship resistance, and its ability to preserve the privacy of the user.
This will lead to a ban
I think this situation could eventually lead to a ban because these measures are essentially an advertising campaign for censorship resistant money.
I think the imposition of these measures will actually have the opposite effect that the Canadian government is intending. They run the risk of actually creating more demand for Bitcoin out of need, rather than speculative money making (Streisand_effect).
If they choose to freeze or seize the bank accounts of protestors, then its not like these protestors stop needing the ability to transact with one another. A ban doesn’t stop the activity, it prompts those who are being banned to find another solution.
A ban will not work
One of the reasons why I think this is a recipe for a bad situation, is that any action taken against users of bitcoin are limited in scope because of bitcoin’s design.
Bitcoin transactions cannot be stopped when they take place on-chain. The Bitcoin Network cannot be shut down. It’s like trying to ban alcohol or marijuana. Alcohol is a drink that results from the fermentation of fruit (which happens everywhere). Marijuana is a plant that can grow basically anywhere.
One of the reasons why the alcohol and marijuana prohibitions did not work is because of the universality of the things that are trying to be banned. The same applies to Bitcoin. It doesn’t exist in one location. It is universal.
Like Marijuana or Alcohol, any attempt to ban bitcoin will have to manifest as banning Bitcoin users, i.e. making it a crime to use Bitcoin.
Again, this does not stop the thing from being used, it simply creates a black market for the item, and pushes the activity into an underground economy. It would create an artificial monetary premium for Bitcoin because there is now additional risk associated from using it. Yet, people receive benefits for using it for specific purposes such as escaping government imposed capital controls.
Moving Forward
The events that are transpiring in front of us will be important for testing what we think we know about Bitcoin.
How resistant to censorship is it?
What sort of action can be taken against it, and those who use it?
Will it become politicized?
Will it become yet another topic of conversation that divides people socially?
How long will the Emergency Act, and the resulting capital controls last?
How far is the Canadian government willing to go with respect to freezing and seizing funds in the name of public safety?
Admittedly, I have more questions than answers at this point in time, but I will be watching these events unfold closely and publishing any information that is relevant to the perception of bitcoin and cryptocurrency.
A Word of Optimism
I will now take a pause to just say that I think I am projecting and outlining the worst case scenario. I desperately hope, and honestly think that that none of the above will happen.
At the end of the day, I aim to be a voice that articulates what bitcoin is, and what it can do. I want to promote Bitcoin as a neutral tool, and I understand that people will use it in whatever way that suits them.
I think it is their right to do so. I don’t support the use of Bitcoin for crimes such as human trafficking or hiring a hitman. Whether or not the funding of the convoy is a crime is a topic that I will not be opining on.
Lastly, I encourage you not add to the current cultural divide taking place. It is not about right or wrong, it is about whether or not you understand. No matter what you believe, “Together we stand, Divided we fall” — Hey You, Pink Floyd
Regards,
Keegan