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.”
States around the world are chipping away at the freedom enhancing qualities of the purportedly permissionless virtual currencies that have proliferated since the pseudonymous Satoshi Nakamoto unleashed bitcoin in January 2009. Governments are cracking down on third-party exchanges, seeking to hoover up all transaction data to enforce tax and other laws; they are trying to classify virtual currencies as “securities” in order to tighten the regulatory grip; they are sometimes banning software and digital addresses used to transfer ownership of them. Most ominously of all, some governments are trying to get into the crypto business themselves.
WAR ON CRYPTO ANONYMITY
BY THE END of 2021, according to the industry tracking service Chainalysis, global adoption of crypto had “grown by over 2300% since Q3 2019 and over 881% in the last year.” Institutional investors in 2021 traded $1.14 trillion worth of cryptocurrencies on the leading exchange Coinbase alone. Digital currency commercials so dominated the 2022 Super Bowl that advertising insiders dubbed it the “Crypto Bowl.” And while the market capitalization of the crypto space plummeted to $957 billion as of
