Although the streets of Ottawa are now mostly quiet, Prime Minister Justin Trudeau’s administration has prolonged the state of emergency declared to deal with trucker protests that have caused congestion at the US-Canada border. The Royal Canadian Mounted Police as well as the Financial Transactions and Reports Analysis Centre of Canada, otherwise known as FINTRAC, used the Emergencies Act to crack down on the political action’s financing, including cryptocurrency.
This onslaught comes at an inopportune moment. Furthermore, the United States has also begun to flex its muscles in an attempt to limit the use of blockchain technology for illegitimate or unlawful enterprises. A sizable portion of the cryptocurrency industry has signaled its willingness to assist.
Is the Blockchain Really Anonymous?
The crypto showdown in Canada helped debunk the myth that the blockchain network is a completely anonymous space.
Although crypto wallets do not include personally identifiable information, wallets placed on a centralized exchange are connected to a user account that can be identified, and blockchain transactions can be tracked from start to finish. Transfers to more than 24 crypto wallets have been halted by Canadian authorities.
According to Mike Fasanello, the company’s head of Training and Regulatory Affairs, the Blockchain Intelligence Group traced the movement of at least $2.25 million worth of cryptocurrencies to many donor wallets that functioned as a funnel to the primary protest group address. He went on to say that it was unknown whether the payments were received or if the Canadian government was able to prevent them.
FINTRAC and other Canadian agencies can get private account details behind addresses associated with exchanges or banking institutions, even if the wallets do not have names associated with them, according to Fasanello. Users cannot be protected, according to Kraken CEO Jesse Powell, who added that the cryptocurrency exchange would be obliged to comply with a government request to freeze assets.
Melody Brue, a Moor Insights & Strategy analyst, agreed. She stated that custodial exchanges can’t secure users’ money if a government declares an action criminal — even if there is no legitimate legal procedure to make that conclusion. This should be a red flag for cryptocurrency exchange users.
Crypto Leaders Take a Stand for Consumers
There are techniques to obfuscate crypto transactions, such as using “stealth wallet addresses,” according to Fasanello; however, these ruses are frequently linked to financial fraud and other crimes.
Major crypto players issued a strong statement last week stating that they do not want that association to exist and take “know your customer” and the risks of illegal conduct very seriously.
TRUST is a network introduced by Coinbase and Anchorage Digital that would allow crypto firms to conform with the Justice Department’s Travel Rule, which states that data about who is transferring how much to whom must travel with large financial transactions.
A day later, Coinbase and Circle, among other crypto companies, introduced Verite, a new system that could also allow cryptocurrency companies to authenticate transactions without divulging personal information.
According to Brue, these are challenging steps because self-custody and confidentiality are key to the utilitarian value of DeFi; this is practically financial censorship. However, when decentralization and censorship resistance has the potential to open the door to illicit behavior, such as money laundering and terrorism, it becomes a dangerous game.
Legislation Making its Way into DeFi
According to Rob Siegel of the Stanford Graduate School of Business, crypto is working for a cleaner reputation, which is why KYC-related measures are sensible at a time when authorities are paying greater attention to the industry. He noted that while the steps may not preclude regulation, they show that crypto businesses are cognizant of where authorities are planning to look to prevent corruption, money laundering, and so on. Whenever the authorities — or the Mounties — arrive, crypto intends to be on the right side of things.
The Bottom Line
The world of cryptocurrency is still very new, and because of this, it is still very much unregulated. With world governments starting to recognize crypto as a genuine form of currency, they have begun the process of discussing ways to legislate the industry. This could change the entire crypto sphere as we know it; whether these implementations will be positive or detrimental for big cryptos is something that only time will tell.