Canada Kills The Anonymity Case For Crypto

In what may be the largest blow to the use case for cryptocurrencies globally, it appears that the Canadian government has been successful in identifying a number of crypto accounts linked to protestors. In fact, as per the RCMP, a total of 235 bitcoin had been been frozen by the government in relation to the protests.

While the identification earlier this month of the couple that held funds related to the 2016 hack of Bitfinex was a much publicized event that reportedly took months of work by government agents, this latest event seems more significant in the long run. The asset seizure of the crypto, while not necessarily a death blow to the sector as a whole, demonstrates just how little anonymity exists in a space that built itself upon the idea of being decentralized and anonymous – and therefore, supposedly, free.

The seizure of 235 bitcoin was conducted via a court order issued in Ontario just last week, with the seizure involving 123 addresses. While the RCMP provided the bitcoin figure, quantity details on other coins seized, which include ethereum, litecoin, cardano, monero, and ethereum classic among others, were not provided. It should be noted however that total funds claiming to have been frozen by the RCMP related to protests (which include fiat currency) is said to be $7.8 million – which, based on the current price of bitcoin, doesn’t exactly jive with the 235 bitcoin figure provided.

Funds in the account were frozen via a Mareva injunction, which is used to freeze defendant assets to prevent the funds from “disappearing” prior to a judgement being made in a legal case. It should also be noted here that digital asset platforms and exchanges, as well as custodians, were directed to freeze any transactions related to the wallet addresses outlined within the court order.

While the news may be a major red flag for the intended purpose of crypto, it shouldn’t come entirely as a surprise to those that even vaguely follow the space. The industry itself has evolved from its origins, wherein anonymity was seemingly the entire goal of the exercise. In a bid to be viewed as legitimate, many exchanges, such as those permitted to operate in Canada, have increased their KYC, or know your client, requirements to levels akin to their fiat currency financial peers – and thereby eliminating one of the main arguments in favor of the use of crypto.

And this isn’t exactly unique to Canada. The United States FBI last week announced that they had formed a new bitcoin unit, referred to as the National Cryptocurrency Enforcement Team, or NCET, to among other items, focus on cryptocurrency seizures where they are used to commit or facilitate criminal activity. The ability to seize the assets inherently indicates the removal of some level of anonymity of the digital assets.

Lastly, it should also be noted that the RCMP is also looking to stomp down the suggestion of moving crypto to self-custodial wallets, which are able to more easily escape government control. The government agency is reportedly looking into comments made by Coinbase (NASDAQ: COIN) CEO Brian Armstrong, as well as Kraken CEO Jesse Powell, suggesting the use of such tools and whether it is in violation of the freezes put in place by the Canadian government.

So with the removal of the key feature of crypto assets, that being anonymity, we’re left wondering.. what’s the point?

Information for this briefing was found via the Toronto Star, Twitter, the RCMP and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply