The story about the Canadian government’s standoff against the Freedom Convoy was the most important for mainstream media coverage of the social effects crypto. Many observers have rediscovered the value of Bitcoin’s ability to resist state financial censorship after the government invoked emergency powers to suppress a protest movement.
The argument is that if a government as civilized as Canada can arbitrarily remove a group from the financial system, any state could potentially do the exact same to any other group. This situation is complex, and there are many nuances. It doesn’t matter how complex the news is. What matters is that the global audience can take away the simple and digestible message. The main message seems to be: Financial censorship can be scary. Crypto offers a way around.
Canada: Canada is not so polite anymore
Since mid-January 2022, a series of protests against COVID-19 mandates in Canada have been ongoing. The government of Trudeau considered extreme measures to stop the protests, including the invocation of an untested Emergencies Act. These measures included expanding the Terrorist Financing rules to specifically target payment service providers and crowdfunding platforms used by the protestors. The Freedom Convoy had already amassed large amounts of crypto donations by that point, which was recognized as fair game by the government.
Jesse Powell, cofounder and CEO of crypto-exchange Kraken, condemned the government’s actions, but stated that if asked to freeze assets by extrajudicial police, the platform would “probably consent”. Powell also advised anyone worried about government overreach not to transfer their funds to centralized custodians, and to trade peer-to-peer.
It is 100% certain that it will happen. 100% also, we will have to comply. If you’re worried about it, don’t keep your funds with any centralized/regulated custodian. We can’t protect you. Trade p2p only, and get your coins/cash back.
— Jesse Powell (@jespow), February 18, 2022
Many who called the government’s actions overreach acknowledged that they did not sympathize with the protestors core message. This is surprising considering the popularity of anti-vax views among Twitter intellectuals. However, the general sentiment among crypto folk was in line with “I disapprove what you say, but will defend to death your right to speak it.”
BlockFi: A chance to comply with $100 million
Of the two main approaches to financial regulation: regulation by enforcement and thorough rulemaking, it is more expensive. It takes a lot of research and foresight to create a comprehensive set rules. Alternative options include defining the boundaries of what is permissible and what isn’t and letting industry participants determine more specific rules through trial and error. BlockFi, a leading crypto lending company, has agreed to pay $100m to settle 32 state attorneys general’s charges.
The firm, which had previously operated in a grey regulatory zone, paid a substantial sum to find out what was wrong with its best-selling product, the BlockFi Interest Account, high-yield. After receiving a few tips, the firm will have 60 days for the offering to be in compliance with the Investment Company Act. BlockFi already plans to launch its SEC-compliant loan product, BlockFi Yield. We will see if the penalty was worth it in the coming months.
Bills keep coming
The U.S. Congress was busy last week drafting crypto-related bills. The bill, titled “Keep Your Coins”, was introduced by Warren Davidson, a congressman. The bill, which was introduced to the House just days after the Canadian Emergencies Act was invoked, would prohibit U.S. federal agencies limiting individuals’ cryptocurrency transactions and purchasing of goods or services for their own purposes. The Stablecoin Innovation and Protection Act, proposed by Josh Gottheimer, is a more nuanced framework to regulate stablecoins. The proposed legislation would exempt so-called qualified stabilitycoins, which are backed by Federal Deposit Insurance Corporation in a manner similar to fiat deposits.
A group of Wyoming legislators proposed that Wyoming issue its own stablecoin, which is U.S.-pegged. The Georgia House of Representatives will also consider a bill to exempt crypto miners from the sales tax.