More On: Bitcoin
Cryptocurrencies provide a mechanism to shield money against authoritarian regimes, which is something that even the world's most free countries must consider.
Crypto critics should look past their day-to-day experience "where they benefit from liberal democracy, property rights, free speech, a functioning legal system, and relatively stable reserve currencies like the dollar or pound," according to Alex Gladstein of the Human Rights Foundation in an article last year. Gladstein then went on to examine the global context at the time, arguing that while most Americans may not need cryptocurrencies, the rest of the world did.
However, it appears that Americans do not need to look as far as he originally intended.
When the news initially broke, Norbert Michel, Walter Olson, and I stated that Canadian Prime Minister Justin Trudeau's move to utilize the Emergencies Act was primarily intended to freeze the bank accounts of those involved in the trucker demonstrations without a court order.
Trudeau made the case for bitcoin with that single phone call: cryptocurrencies provide a mechanism to secure one's wealth from authoritarian governments, which is a decision that needs to be taken even in one of the world's most free countries.
Just three words: Resistance against Censorship
One of the most essential qualities of cryptocurrencies for those caught under authoritarian regimes is their resistance to censorship. Where governments can use financial institutions to control or censor the public (e.g., bank account freezes, asset forfeiture, etc. ), cryptocurrencies provide a new way to secure one's money.
Traditional financial institutions have a difficulty in that they rely on the employment of third-party intermediaries, which creates a "choke point" that governments can exploit. For example, the United States government considers owning a bank account to be a surrender of one's Fourth Amendment right to privacy when it comes to financial records, according to the third party theory.
With contrast, the lack of a third-party intermediary in decentralized cryptocurrencies implies that the government has no one to pressure to divulge a person's information save the direct owner of that information, as previously stated. If the US government wanted to take action against such a direct owner, it would have to present its case and obtain a court order first.
A word of caution: keep your coins
However, the third-party theory does not totally exempt cryptocurrencies. In fact, bitcoin users frequently utter phrases like "Not your keys, not your coins" as a result of this reality. In a nutshell, the statement merely emphasizes the importance of self-hosted wallets. If you opt to entrust your wallet to a third party, you will be missing out on all of the benefits that cryptocurrencies have to offer.
With the introduction of Bitcoin and other cryptocurrencies like it, people were able to bypass intermediaries and electronically self-host their money. To put it another way, it allowed you to "be your own bank." However, this chance hasn't deterred consumers from utilizing a middleman. Kraken, Coinbase, FTX, and a slew of other exchanges have made it easier than ever to utilize cryptocurrencies, but this convenience comes at a cost: they, too, are subject to the third-party doctrine, just like traditional banks.
That truth was highlighted when Jesse Powell, the CEO of Kraken, replied to the situation in Canada by honestly stating that government orders to freeze accounts have occurred in the past and will most certainly occur again in the future where people employ intermediaries. "If you're concerned about it, don't keep your funds with any centralized/ controlled custodian," Powell advised. We are unable to safeguard you. Get your coins/cash out, and just [peer to peer] trade."
As if things couldn't get any worse in Canada, the Ontario Securities Commission sent Powell's tweet (together with one from Coinbase CEO Brian Armstrong) to law authorities on the grounds that he was providing instructions on how to circumvent the limits.
The Ontario Securities Commission's reaction demonstrates why it is critical for the United States to get ahead by providing self-hosted wallet protections. Representative Warren Davidson's (ROH) Keep Your Coins Act, for example, would make it illegal for government entities to ban the usage of cryptocurrencies in self-hosted wallets if it were enacted. Otherwise, regulators may enforce unattainable compliance demands and prohibit the use of self-hosted wallets.
Bank of England Contextualizing Digital Currencies
Trudeau's decision, on the other hand, did not simply support cryptocurrencies. It also argued against CBDCs, or central bank digital currencies.
If Canada had a CBDC, the process of freezing accounts would have been sped up and on a far larger scale, especially at the individual or retail level. Proponents of CBDCs have often praised the programming and surveillance capabilities of a CBDC. This kind of limited control would have put the Canadian government in direct contact with the protestors' financial resources. If a CBDC is adopted in the United States, it will have the same effect.
Representative Tom Emmer (R-MN) warned on February 8 at a Competitive Enterprise Institute event that "digital authoritarianism" would be utilized to suppress protests in the states. He said that he believes the Federal Reserve should be prohibited from issuing CBDCs at the retail level because of this risk.
Zooming In and Out
"Monday's edicts underline how hazardous it is to arm government with the kind of financial and emergency powers that can bypass due process, bring targets to their knees through economic incapacitation without trial, and rip privacy," wrote Walter Olsen. Whether you supported the convoy or not, this is an issue that everyone should be concerned about. "If the politicians you like can freeze the accounts of the protestors you detest, then the politicians you despise can freeze the accounts of the demonstrators you like," Jake Chervinsky wrote. How confident are you that the politicians you despise will never, ever return to power?"
Canada has begun to unfreeze protestors' bank accounts, but this is a decision that should not be forgotten anytime soon. It's a stark reminder of the power that governments wield, which they can employ at any time to control the public.
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