GOVERNMENTS SCRAMBLE TO MANAGE REGULATE, AND THROTTLE CRYPTO

MOST DANGEROUSLY OF ALL, THEY'RE STARTING TO MAKE THEIR OWN CENTRAL BANK DIGITAL CURRENCIES.

- BRIAN DOHERTY

ON JANUARY 15, 2022, the Canadian government closed its borders to unvaccinated American truckers and began requiring domestic truckers to show proof of COVID vaccination when crossing northward, infuriating drivers and snarling North American trade. Within two weeks, thousands of "Freedom Convoy" protesters filled the capital city of Ottawa, demanding the requirement be lifted. Officials responded by branding them "extremists," even "terrorists," and quickly began treating them as such. On February 4, the Canadian government pressured the crowdsourcing service GoFundMe the truckers' seemingly decentralized source of financing-into abruptly stopping further transfers.

Ottawa was just getting started. On February 14, the federal government invoked the Emergencies Act, which let it freeze any bank account or legal financial instrument that could be traced to the truckers. So convoy supporters turned to bitcoin, the decentralized, peer-to-peer, blockchain-enabled digital currency whose whole raison d'etre-maintaining a separation between currency and government-seemed designed for moments like this.

Or not. Most bitcoin transactions-75 percent, according to an October 2021 working paper published by the National Bureau of Economic Research-are conducted through cryptocurrency exchanges. These, being legally licensed businesses (at least in theory), are vulnerable to the same interference as old-school financial institutions. The Canadian government demanded that the exchanges block all crypto wallets that could be linked to the protesters, and it initially seized the contents of some outright. "We will be forced to comply," tweeted Jesse Powell, then-CEO of major crypto exchange Kraken. "If you're worried about it, don't keep your funds with any centralized/ regulated custodian. We cannot protect you. Get your coins/ cash out and only trade p2p."