[For CoinDesk, here are my thoughts about bitcoin, the Ottawa truckers, and the Emergencies Act.]
Bitcoin Is a Bad Way to Fund the Ottawa Protest, and That's a Good Thing
Bitcoin has been advertised as a viable way for getting funds to the truck convoy protestors in Ottawa when fiat-based tools like GoFundMe don't work. But it has proven to be a less-than ideal way to fund the trucker convoy. And that's a good thing for Canadian democratic society.
The 20-day Ottawa protest has long since transitioned into illegal territory. Like any other illegal protest on Canadian soil, it needs to be ended. Unreliable funding only helps to reduce the mischief, especially if that funding can be nudged into functioning even less reliably.
Don't get me wrong. As a Canadian, I realize that democratic protest is vital. It is one of many ways for citizens to change minds and initiate change. Money is integral to supporting protest. And the Ottawa trucker convoy – which started as a protest against coronavirus vaccine mandates – has aptly demonstrated the power of several new protest-friendly, internet-based financial tools: crowdfunding, instant personal bank transfers and bitcoin.
A GoFundMe campaign to fund the Ottawa convoy began on Jan. 14, hitting $7.9 million just a few weeks later. When the campaign was canceled by GoFundMe on Feb. 4 for breaking its terms of service, a replacement campaign hosted on competing U.S. crowdfunding site GiveSendGo beat that amount within a few days. It currently stands at $9.5 million.
A parallel bitcoin fundraiser, organized by a trucker-support group called HonkHonkHodl, on Tallycoin, a bitcoin-based crowdfunding site, quickly raised 21 bitcoins ($900,000). Another $400,000 was reportedly donated to organizers via Interac e-Transfer, Canada's version of Zelle.
When protest becomes illegal, it's the task of the police to step in and break it up. Any inability to do so on their part hurts one of the other key pillars of democratic society: rule of law. If the law no longer functions, Canada would quickly descend into a state of perpetual chaos.
By Feb. 9, the protest had reached the illegal stage. That day, the Ottawa police department notified protestors they were engaging in mischief, a criminal offense. The "unlawful blocking” of streets was resulting in citizens being denied the "lawful use, enjoyment and operation of their property," declared the police department's press release, and the convoy was henceforth required to cease its blockade of downtown Ottawa.
But the protestors didn't comply.
When protests are illegal, law enforcement has a number of tools at its disposal to restore order including arrests, fencing, space control and negotiation. But the Ontario provincial government added an additional lever that (as far as I know) has never been used to control an illegal Canadian protest: It shut down the convoy's massive crowdfunding campaign.
Ontario's attorney general secured a restraint order from an Ontario judge freezing all donations received via the convoy's two GiveSendGo campaigns. The restraint order, which was issued under Section 490.8 of Canada’s Criminal Code, also extended to GiveSendGo funds already transferred to convoy organizers, including the convoy’s non-profit organization. The legal justification for the restraint order was the usage of the funds to commit the "indictable offense of mischief."
GiveSendGo boasted that the restraint order didn’t apply to it, but it was an empty boast. Any Canadian bank that received a wire transfer from GiveSendGo for credit to the convoy’s bank account was obligated to immediately freeze it, on pain of breaking the law. The order had neatly crippled the $9 million in crowdsourced funds.
Although the Tallycoin bitcoin fundraiser was not named in the restraining order, it was no less vulnerable to being frozen than the funds on GiveSendGo. The coordinators of the bitcoin fundraiser had envisioned distributing the 21 crowdfunded bitcoins to the same set of convoy leaders who were beneficiaries of the GiveSendGo campaign. The convoy leaders would then convert the bitcoins into Canadian dollars via an exchange and spend them.
It's pretty easy to spot the weakness. The very same judge who issued a restraint order on the nonprofit organization's GiveSendGo funds could have also issued it on the bitcoins raised on Tallycoin by the nonprofit. No bitcoin exchange in Canada was going to touch those funds, thus confining the 21 bitcoins to the same purgatory as the $9 million in GiveSendGo funds.
The coordinators of the bitcoin fundraiser have since shifted to a complicated strategy of paying bitcoins directly to truckers, the idea being to avoid single points of control. But evading centralized infrastructure means subjecting truckers to all of bitcoin’s pain points, reducing the fundraiser’s effectiveness so it shouldn’t be much of a concern to law enforcement.
Efforts to quell the illegal protest have since crescendoed with the federal government's invocation of the Emergency Measures Act, a law that gives the federal government extra powers during times of national crisis. Among other things, the Emergency Measures Act temporarily allows Canadian financial institutions to freeze accounts of any individual or business affiliated with the illegal blockades. A court order need not be secured, and the government says it will protect the banks from being sued for damages.
In addition, financial institutions must disclose to the Royal Canadian Mounted Police or Canada’s intelligence agency, CSIS, whether they are holding funds for participants in the protest.
The measures will help foil bitcoin person-to-person funding attempts. The RCMP has already sent letters to Canadian cryptocurrency exchanges asking them to cease dealing in 30 different bitcoin addresses, presumably those involved in the Tallycoin fundraiser. Because bitcoin transactions are public and traceable, exchanges will be able to freeze trucker accounts if they are linked to the embargoed addresses.
The powers afforded by the Emergency Measures Act make me very uncomfortable. It's one thing to use regular legal channels like Section 490.8 of the Criminal Code to secure restraint orders on large actors involved in mischief and unlawful blockades. That seems like a reasonable addition to law enforcement's arsenal of tools for ending illegal protests. We know it worked. The $9 million in GoFundMe funds are immobilized.
But it's a completely different thing to introduce special measures for freezing any and all accounts associated with the protest, and to do so without a court order or the opportunity for citizens to take banks to court. Undeserving Canadians who may have donated $20 to a cause they didn't entirely understand could get caught up in the blast radius.
Canadians don't yet know all the gritty details that led the government to invoke the Emergency Measures Act. But when the time comes for the automatically mandated official inquiry into the government's actions, the government will have to prove to citizens that it meant to prevent something more than just the "unlawful blocking” of Ottawa streets, but something truly sinister. Until it does so, the powers afforded by the Emergency Measures Act should worry all Canadians.
P.S.: After this was published, a class action suit brought by Ottawa-based businesses convinced an Ontario court to freeze the assets held by the individuals carrying out cryptocurrency fundraisers. Third-parties such as banks, crypto exchanges, custodians are instructed to cease all dealings with the crypto assets mentioned in the court order.
A class action suit brought against the Ottawa truckers has succeeded in getting a Mareva injunction on @nobodycaribou, @BJdichter, and others involved in crypto fundraising. The injunction prevents them from selling, transferring or dissipating funds.https://t.co/JB7qwfh6uj pic.twitter.com/VlALzDH3fq— John Paul Koning (@jp_koning) February 18, 2022
This reinforces my two points. Bitcoin is advertised as a tool for dissent, but it's not very good at that role. And if regular legal remedies such as Mareva injunctions and Section 490.8 restraint orders are successfully being deployed to freeze funds, why do we need the extraordinary account freezing powers afforded under the Emergencies Act?
"Because bitcoin transactions are public and traceable"ReplyDelete
This is not completely true. It looks like the organizers of the Convoy chose to use public addresses in tallycoin for transparency. They could have structured through an xpub or through Paynyms, which makes it very difficult to identify addresses.
They also have a Monero (XMR) address available where nothing is traceable at all.Delete
"They could have structured through an xpub or through Paynyms..."Delete
Why didn't they do that?
I am not completely sure, but it seems they used public addresses for transparency, so the truckers knew that the organizers did not keep donations for themselves.Delete
Ok. I could also see it as a way to prove to the people who donated that the funds weren't stolen.Delete
Yes, that's what I meant by transparency. Anonimity is a really complex issue. Lots of trade offs everywhereDelete
Bitcoin didn’t fail to do anything. People failed to use bitcoin, they used some shit centralized service called gofundme and got shutdown. Article should be “use bitcoin first (the best money on earth) not last.”ReplyDelete