Things are getting pretty wild up in Canada. While other countries are removing their COVID restrictions, our neighbors to the north have decided to invoke emergency powers to seize the bank accounts of those who oppose lockdowns and mandates. Meanwhile, state media is prowling through a hacked database of convoy donors (isn't that a bannable offense on Twitter?) to dox and open targets to harassment.
Financial deplatforming has always been a threat, but it's mostly been a remote one. With these unprecedented banking punishments against the Canadian trucker convoy and its supporters, the reality of the controls baked into our financial system have become clear to the world.
Yes, "bitcoin fixes this." But it's not as simple as repeating this mantra. It is absolutely possible to transfer value directly with a peer without any bank or government being able to stop or reverse it. But it's not easy. Preparing for an explicitly politically controlled financial system means learning now about how to use cryptocurrency and what controls the government still has over certain service providers.
Our legacy financial system is controllable because it is largely operated by third party custodians—banks and payment processors—that move your money around. If we don't use cash (physical or digital), we are dependent on these financial institutions to go about our days.
Governments saw the power of financial control long ago. Banks are required to compile dossiers on customers—your identifying information, your commercial habits, your recipients—to share with governments or other institutions.
Furthermore, institutions can be directed to shut off financial access to enemies of the state. This has traditionally been "rogue" nations and terrorist outfits, but Canada decided to expand this net to include the hundreds of thousands of normal Canadians who oppose government lockdowns and mandates.
In invoking the Emergencies Act for the first time, Prime Minister Justin Trudeau has directed financial institutions—including banks, payment processors, online platforms, credit unions, loan services companies, insurance companies, securities dealers, and yes, cryptocurrency exchanges—to deplatform any "designated person" engaged in prohibited activities. Specifically, service providers must cease "dealing in any property, wherever situated," "facilitating any transaction," "making available and property," or "providing any financial or related services" to designated persons.
You got that? If you materially support the convoy, you are basically banished from Canadian commercial life. You might not be able to get cash out of the bank! Enjoy your democracy, citizen.
According to the Emergencies Act, Parliament must review and either approve or deny the invocation within seven days of its establishment. As of this writing, this still hasn't occurred. In the meantime, Finance Minister Chrystia Freeland has announced her intentions to hold onto these financial controls "permanently." Either way, this incident has made the use case for bitcoin painfully obvious.
Bitcoin provides a way to send and receive direct payments. This means that the truckers and their supporters will always have a way to transfer value even if they get cut off from the financial system.
But bitcoin is not magic. There are limitations and controls even within the bitcoin economy. We need to understand these now so that if we are ever placed in a similar situation, we will know how to navigate around them.
The first problem: many third-party bitcoin service providers are regulated, too. If you sign up for a custodial service like Coinbase or Square that holds the private keys to your bitcoins, then you could find yourself deplatformed just like if you had an account with Bank of America. These third-party services are regulated just like the legacy guys, and they collect and report information on your transactions.
The Canadian government leaned on custodial cryptocurrency exchanges to cut off access to dissidents. This doesn't just mean cutting off the Coinbase accounts of people at the protests. It means preventing any other Coinbase account from donating to the blacklisted address of a self-hosted (sovereign) account. They have that ability so it will be exercised.
There is a bit of confusion on this point. The Canadian government did not (and cannot) "freeze" any bitcoin account. All they can do is direct a regulated entity to freeze a cryptocurrency account that it controls (it holds the keys) or blacklist self-hosted accounts, which means regulated cryptocurrency platforms are compelled to prevent their accounts from engaging with those blacklisted accounts.
If you hold your own keys, no government can steal your money or prevent your transactions. All a government can do is boss regulated platforms around. Of course, a lot of people have accounts with those regulated platforms, so it's not an insignificant amount of power.
There is a solution: hold your own bitcoin keys and avoid using third party custodians. Don't put yourself in a situation where you can be cut off from your own coins, or one where your service provider can limit where you can send money. This means we need to learn about safe storage and make transactions directly from wallets we control. That way, banks and governments can never prevent you from transferring value as they have done in Canada.
But this leads us to the second problem: getting money in and out of bitcoin. The most convenient on-ramps and off-ramps—bridges in and out of the fiat economy—are also regulated.
Let's say you have learned about self-sovereign finance, manage all your keys and coins on your own, and even run a bitcoin node for extra security. You can easily send bitcoins to an address for the trucker convoy, as has been set up. Well, what do the truckers do after they have received the bitcoin?
Bitcoin is far from universally accepted at stores. It's not like the truckers can spend bitcoins directly to get all the resources that they need.
Okay, so you need to get dollars. Exchanges like Coinbase are the most common way that people trade bitcoins for dollars. Those dollars are then usually sent to a traditional bank account or app. That's a no-go if you find yourself on the underdog side of an anti-government movement.
There is also a solution here, but it's not easy, either. Bitcoin owners can try to find someone to buy their coins for cash. It is best if you can do this with someone you know and trust, but there are forums and marketplaces that can connect you with a buyer. Unfortunately, some of the most popular ones, like LocalBitcoins and Paxful, must submit to financial surveillance requirements (AML/KYC) as well, so this will leave a trail.
Alternatively, you can use bitcoins to purchase gift cards that you can then either sell or use to buy needed resources. There are risks here, too: the colorful characters involved with the $4.5 billion Bitfinex hack were partially foiled by the purchase of a Walmart gift card. And if you're managing the millions of dollars' worth of bitcoins that the truckers received, spending $500 at a time on random gift cards is not the most efficient way to convert your money.
The longer-term solution is to encourage more businesses to accept cryptocurrency so there is no need to bridge into government-controlled money at all. If the financial system does continue to become more politicized, we may see more people wanting to get paid in bitcoin so they have an exit option should they need it. This means more businesses may become comfortable with the idea of accepting cryptocurrency if enough people want to use it. After all, multinational corporations like McDonalds already accept bitcoin in El Salvador to comply with that country's bitcoin law. They could easily do the same elsewhere.
This brings us to the third and final problem: chain forensics. Let's say you have become a totally self-sovereign bitcoin user that is 100 percent in the bitcoin economy with no need to obtain dollars. If you're not careful, you could trivially leak your identity and therefore all the politically sensitive donations that you've made.
Victims of the GiveSendGo breach who donated to the truckers have found themselves hounded out of their jobs and harassed by enemies. If bitcoin users aren't careful, they could expose themselves to similar attacks.
The bitcoin ledger of all transactions is radically transparent: it is public, viewable, and unchangeable, for all time. You can create as many addresses, kind of like an account, as you want, but there are techniques to try to identify associated addresses. The threat isn't just a super data scientist, either: if you put a public wallet on your social media profile, that can be tied to your identity. If you then use that wallet to send money to a politically disfavored cause, then you can be easily targeted.
There are tools to preserve privacy with bitcoin. You can structure your transactions in a way that frustrates the heuristics that chain forensics companies use to associate addresses and determine identity. One potent tool is called a CoinJoin, which obfuscates senders and recipients to outside parties. Bitcoin developers are including new privacy features into the protocol all the time; the recent Taproot upgrade makes complex kinds of transactions indistinguishable from normal transactions to chain analysis, for instance.
There are other cryptocurrencies that were purpose-built to bake privacy into the protocol layer. Two popular options are Zcash and Monero, which employ techniques called zero knowledge proofs and ring signatures to partially or fully shield the addresses of senders and receivers on the blockchain.
There are downsides here, too. Privacycoins are supposed to give the user confidence that transactions are still valid, but there have been bugs before. There are also fewer developers working on these projects and therefore fewer eyes to find issues in the code. Finally, privacycoins face the on-ramp and off-ramp problem with the fiat economy even moreso than bitcoin because there are fewer bridges to begin with.
I don't want to undersell bitcoin's promise as a tool for liberation. The future of cryptocurrency is a potential environment where these technologies can give the greatest amount of financial freedom to the greatest number of people. It's something of a miracle, and it's well worth learning about.
But it's also time to realize that we're already having to contend with a politically controlled financial system. We can't wait until we find ourselves in a similar situation to the Canadian truckers and expect bitcoin to work perfectly like magic.
It's time to learn about cryptocurrencies like bitcoin, Monero, and Zcash to understand how they work and how to get more control over our finances. Businesses should be encouraged to start accepting cryptocurrency. More people need to learn about chain forensics and how to protect privacy. And for heaven's sake—people need to learn about the risks with regulated exchanges! Even the CEOs of these platforms are telling customers to get money off these exchanges if they are worried about deplatforming.
Winning liberty is rarely, if ever, easy. We are fortunate enough to have a powerful tool to protect our finances against political control and monetary mismanagement. The choice to capably use it is ours.