Canada Activates Emergencies Act And Targets Crypto
BlockFi Registers with the SEC
BlockFi has been ordered to pay a $100 million settlement with the SEC and state regulators. They've been under investigation since the end of last year for offering yield as high as 9.5% to users. With inflation currently at 7.5% (according to official numbers), this opportunity for people to safeguard the value of their savings has been extremely popular. But the SEC is adamant that people not be able to earn interest without their permission.
SEC chairman Gary Gensler remarked:
"Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws. I’d like to thank and commend our remarkable SEC staff and state regulators for their efforts and collaboration on this settlement".
Not everyone feels that this was a win. Erik Voorhees, founder of the now decentralized ShapeShift, said:
“It's disgraceful that regulators are stealing $100m from BlockFi.
They did nothing wrong; they harmed nobody. They built a great company that provides a service customers love.
The absurdity of penalizing an innovative company that offers 8% yield on the dollar while inflation ravages peoples' savings...
Welcome to the USSA.”
BlockFi will pay fees accumulating to $100 million to the SEC and 32 states to settle allegations that its BlockFi Interest Account (BIA) service was an unregistered security. BlockFi said on Monday that it plans to file a draft registration statement with the SEC for a new crypto lending product entitled “BlockFi Yield”. Existing customers will be smoothly transitioned into the program without fear of losing what they have already earned under the previous system, but new deposits will be under the new BlockFi Yield rules.
Thank you, SEC, for protecting us from the dangers of being able to earn interest on our savings.
Canada Activates Emergencies Act And Targets Crypto
Canadian Prime Minister Justin Trudeau has enacted the Emergencies Act for the first time since its creation in 1988. He said in a statement:
“This is about keeping Canadians safe, protecting peoples' jobs and restoring faith in our institutions.”
The Emergencies Act allows the federal government to take “special temporary measures to ensure safety and security during national emergencies”. The national emergency in this case refers to the “Freedom Convoy”, a massive caravan of truckers moving across Canada. It began as an industry-wide protest against vaccine mandates for all truckers who re-enter the country after traveling into the United States. It has since galvanized broader anti-government support from people who are protesting what they consider heavy-handed tactics from the government.
Different media accounts about the situation in Canada paint opposing pictures. On the one had there are reports of mass public disturbances, vandalism, and violence. On the other hand, a source on the ground told NBTV:
“I've seen 0 incidents of destructive behavior. Every single person I've met are genuinely nice people, many coming with their entire family with signs to support the protest … The media is completely lying and reporting whatever they want, few protestors are doubting if the media is working with psyops from the government.”
NBTV is not on the ground in Canada, so although we wish we could give you a complete first-hand account of the situation, we unfortunately cannot.
But we can look at the Emergencies Act itself: it has given Canadian banks the unprecedented power of freezing anyone’s accounts without a court order.
Chrystia Freeland, the Deputy Prime Minister, said:
“The government is issuing an order, with immediate effect, under the Emergencies Act … As of today, a bank or other financial service provider will be able to immediately freeze or suspend an account without a court order, and in doing so, they will be protected against civil liability for actions taken in good faith.”
Law enforcement has also been authorized to seize vehicles, cancel insurance, and seize pets, amongst other measures.
The Canadian Civil Liberties Association said that the government had not met the threshold that would warrant enabling the Emergencies Act, warning that such emergency legislation “should not be normalized”.
Although accounts of what is happening on the ground in Canada vary, those who do wish to support the movement have been doing so via financial aid — for example, a massive crowdfunding campaign set up on GoFundMe raised $10 million dollars. This campaign was cancelled by GoFundMe after the National Security Committee asked GoFundMe to explain how these donations “would not be utilised to promote extremism and hate.” Further, with the new Emergencies Act in place, there has been retaliation against those who have both received and sent funds, with people on both sides of the transaction having their accounts frozen.
People looking to donate in ways that can’t be censored have taken to crypto. Many donations have occurred peer-to-peer so that no third party can confiscate them — for example, some people have taken to privacy coins like Zcash so that donations can also remain private.
Tallycoin also became a major hub for crypto donations.
Canada has since announced they will be including crypto and crowdfunding under their laundering and terrorism finance laws. They have also sanctioned 34 crypto addresses tied to the protests, including bitcoin, ethereum, litecoin, monero, and cardano addresses, which have received donations totalling over $870,000. If these addresses are tied to VASP accounts (custodial wallets and exchanges) then compliance will be easily enforced. However, if they are non-custodial addresses, then enforcement of these sanctions will prove more difficult.
The funds in another 120 crypto addresses were ordered frozen by a special Mareva injunction by an Ontario court. Nunchuk.io, the wallet chosen for the HonkHonk Hodl crypto fundraising push via Tallycoin, received one of these Mareva Injunctions. After being ordered to freeze and disclose information about assets involved in the protests, their official response highlighted the difficulty of enforcing bans on users of decentralized protocols:
“Dear the Ontario Superior Court of Justice,
Nunchuk is a self-custodial, collaborative-multisig Bitcoin wallet. We are a software provider, not a custodial financial intermediary.
Our software is free to use. It allows people to eliminate single points of failure and store bitcoin in the safest way possible, while preserving privacy.
We do not hold any keys. Therefore, we cannot freeze our users' assets. We cannot prevent them from being moved. We do not have knowledge of the existence, nature, value and location of our users' assets. This is by design.
Please look up how self-custody and private keys work. When the Canadian dollar becomes worthless, we will be here to serve you too.”
Edge wallet gave a similar response to orders to freeze funds, saying “we can’t even if we wanted to.”
Meanwhile leaders in the crypto space on the custodial side have also spoken out. Jesse Powell, the CEO of Kraken, said:
“Due process is for plebs. Might makes right in Canada. If someone dissents, you just confiscate their wealth, revoke their licenses, exclude them from the financial system and kill their pets. No need to debate the law, policy or even rights when you have a monopoly on violence.”
When asked whether Kraken will be forced to freeze assets, being a custodial exchanged, Jesse replied:
“100% yes it has/will happen and 100% yes, we will be forced to comply. 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.”
His tweet has apparently since been flagged by The Ontario Securities Commission for seeming to offer advice on how users can evade emergency restrictions.
NBTV will continue to try to connect with people who can give a first-person account of what is happening on the ground in Canada.
One Small Step for DAOs, One Giant Leap for DeFi
The Republic of the Marshall Islands has officially recognized DAOs (Decentralized Autonomous Organizations) as legal entities after passing the amended Non-Profit Entities Act of 2021. This amendment to the act now allows for any DAO to register and conduct business in the Marshall Islands, and operate similar to an LLC. Admiralty LLC became the country’s first DAO with help from Shipyard Software, crypto trading platform, and MIDAO Directory Services Inc, an organization created to help DAOs register with the Marshall Islands.
Bobby Muller, co-founder of MIDAO and former chief secretary of the Republic of the Marshall Islands, said:
“The strategy is to provide the lowest cost for incorporation, a supportive government that has internationally recognized courts, and a receptive environment to technological advancements.”
The Marshall Islands, a dollarized country formerly administered by the US, came under scrutiny from the IMF a few years ago after announcing plans to create their own cryptocurrency, the Sovereign (SOV). These plans continue to be delayed due to regulatory complications.
David Paul, Marshall Islands Senator, doesn’t expect the same pushback for their latest plans:
“It’s a different realm for DAOs, as this is more about giving them legal recognition to make their case to regulatory bodies, investors and consumers.”
Bukele Tells America to Butt Out
A new act proposed this week would require the US State Department to report on El Salvador’s cryptocurrency dealings in an effort to deter “money laundering cartels” and “preserve the role of the dollar as a reserve currency of the world”.
El Salvador “dollarized” in 2001, adopting the US currency as legal tender, and then last year became the first nation to declare Bitcoin mandated legal tender in addition. The ACES Act — Accountability for Cryptocurrency in El Salvador — has been put forward by Senators Jim Risch, Bob Menendez, and Bill Cassidy, who believe it’s the US’s responsibility to scrutinize El Salvador’s embrace of bitcoin. Risch said:
“El Salvador’s adoption of Bitcoin as legal tender raises significant concerns about the economic stability and financial integrity of a vulnerable U.S. trading partner in Central America.”
If enacted, the act would require the State Department to report on a subjects ranging from remittance flows from US to El Salvador to details on efforts to deter criminal activity. The IMF also has reproached El Salvador on more than one occasion, advising them to consider the longstanding ramifications of their bitcoin-based decisions.
El Salvadorian President Nayib Bukele was quick to respond to the new Act:
"OK boomers ... You have zero jurisdiction on a sovereign and independent nation. We are not your colony, your back yard or your front yard. Stay out of our internal affairs. Don't try to control something you can't control."
Twitter Follows the Ethereum-Brick Road
Twitter has added the ability to tip your favorite user using crypto from your Ethereum wallet this week. The move is part of their existing tipping feature (introduced in May last year, and expanded in September to include bitcoin), and will now include the world’s second largest cryptocurrency by market cap.
Last month, Twitter began their journey down the Ethereum-Brick Road when they introduced NFT verification for paid "Twitter Blue" subscribers. Johnny Winston, lead product manager of creator monetization at Twitter, said:
“We're continuing to expand ways to get paid on Twitter which includes more choices for creators and fans who want to use crypto. We're excited to add the ability for anyone to add their ETH address to Tips.”
Tipping will now be expanded for ETH and ERC-20 tokens, including support for Ethereum-based stablecoins, and is currently available only on mobile. The tipping feature has also been opened to users in India, Ghana and Nigeria.
We’re excited to see major platforms continue to embrace cryptocurrency and normalize its use.
Tune in the the CryptoBeat and PrivacyBeat LIVE shows every Thursday and Friday at 4pmEST!
By Will Sandoval, NBTV Associate Producer, and Naomi Brockwell.