Despite Recent Threats From Canadian Officials, ‘Real Crypto’ or Decentralized Assets Cannot Be Freezed

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Over the past week, there has been a lot of talk about the “freezing” of digital currency accounts associated with the Canadian trucker’s Freedom Convoy. Amid the topical conversation, it should be pointed out that decentralized cryptocurrencies such as bitcoin and ethereum cannot be frozen directly within the network. However, the Canadian government can flag specific digital currency addresses and go one step further, asking centralized entities like crypto exchanges and payment processors to freeze funds.

Canadian officials can flag crypto addresses and threaten exchanges, but they can’t ‘freeze bitcoins’

Last week, the Canadian government and Prime Minister Justin Trudeau invoked the country’s Emergency Measures Act and enacted Canada’s Terrorist Financing Policy to cover donations of cryptocurrency. Trudeau and the government did this to quell protesters occupying the streets of Ottawa.

The Canadian government was able to convince Gofundme to end Freedom Convoy fundraising and reported 34 crypto addresses allegedly associated with crypto fundraisers. Reports had indicated that Canadian police had sent letters to banks and crypto-asset exchanges and insisted that the companies “stop facilitating any transactions” with the aforementioned reported addresses.

According to a number of financial institutions and crypto companies, the Royal Canadian Mounted Police (RCMP) actually sent the letters. Additionally, another report states that an Ontario Superior Court judge ordered financial institutions to freeze all assets related to the Freedom Convoy, including digital assets.

The order reportedly stemmed 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 told reporters.

Meanwhile, despite the headlines talking about directly freezing crypto assets, it should be noted that this can only happen by threatening law enforcement and targeting crypto-fiat exit ramps.

It is impossible to freeze a bitcoin (BTC) or ethereum (ETH) address and render it useless to the owner. The only way to do this is to use force or threats of imprisonment or death and ultimately obtain a crypto owner’s private keys. This is why fundraisers, like the BTC fund which raised 21 bitcoins, use multi-signature checks.

According to the software developers behind the non-custodial bitcoin wallet Nunchuk, the team received an injunction letter from Mareva. nunchuck write back in the Ontario Superior Court of Justice and told him he could not comply with the orders.

“Dear Justice of the High Court of Ontario, Nunchuk is a self-defense, collaborative, multi-signature bitcoin wallet,” the letter from the Nunchuk team reads. “We are a software provider, not a financial security intermediary. Our software is free to use. While protecting privacy, it helps people eliminate single points of failure and save bitcoin in the safest way possible. Nunchuk’s letter adds:

We do not collect any user identification information beyond email addresses. We don’t have keys. So: “Our users’ assets cannot be disabled.” ‘[We] Unable to “block transactions”. We do not know the “presence, nature, value and location” of our users’ assets. Learn how self-defense and personal keys work. When the Canadian dollar is worthless, we will be there for you.

Kraken CEO Jesse Powell: “We Can’t Protect You – Stick to Real Crypto”

Kraken CEO Jesse Powell explained on Twitter that if people are worried about having their crypto funds frozen, they shouldn’t keep crypto on centralized platforms. Reply to someone commenting about crypto exchanges freezing funds, Powell said it was “100%” the case.

“100% yes it happened/will happen and 100% yes we will be forced to comply,” Powell said. “If you’re concerned, don’t keep your funds with a centralized/regulated depository. We can’t protect you,” Powell Tweeted. In a later TweeterPowell explained that going on-chain to top reserve tokens like stablecoins might not be safe either.

“You’re not necessarily safe just logging into the channel,” Powell said. “Major reserve tokens with centralized issuance and redemption, such as USDT and USDC, have centralized control over freezing functionality that can be commandeered as easily as a bank account. Stick to real crypto,” he added. USDC and USDT issuers have frozen specific stable addresses in the past.

In July 2020, the Circle’s Center Consortium blacklisted $100,000 from the USDC after receiving a request from law enforcement. Tether has blacklisted hundreds of USDT addresses and last month the company froze $160 million worth of USDT. So while digital currency exchanges, crypto-payment processors, financial institutions, and banks can “stop facilitating any transactions” with crypto addresses, decentralized assets or “real crypto” cannot be commandeered. unless the private keys to accounts are taken by threats or physical force.

Keywords in this story

34 Addresses, 34 Crypto Addresses, Bitcoin, Canada, Centralized Exchanges, Centralized Payment Providers, Centralized Platforms, Center Consortium, Circle, Ethereum, Freedom Convoy, Jesse Powell, Kraken, Kraken CEO, Ontario Superior Court, Paul Champ , Payment processors, RCMP , Royal Canadian Mounted Police, stablecoin addresses, stablecoin freezes, stablecoins, USDC, USDT

What do you think of Jesse Powell’s comments about exchanges not being able to protect you and sticking to the “real crypto” claim? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the news manager for Bitcoin.com News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 5,000 articles for Bitcoin.com News about disruptive protocols emerging today.




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