Canada Is Ordering Crypto Exchanges to Blacklist ‘Freedom Convoy’ Addresses

After Canadian authorities issued an order to freeze millions of dollars in donations to anti-vaccine mandate protesters, the "freedom convoy" turned to cryptocurrency. Now, law enforcement has advised exchanges in the country not to transact with addresses identified as being related to the protest. 

Copies of an order from the Royal Canadian Mounted Police (RCMP) began circulating on social media Wednesday morning, following Prime Minister Justin Trudeau's invocation of the Emergencies Act on Monday giving the government more powers to quell the protests and the announcement that donations including cryptocurrency would be targeted by authorities. 

Protesters have been in search of funds as the days have worn on, and Bitcoiners stepped up to the plate, donating 21 BTC worth about $1 million to a campaign called HonkHonkHodl in a bid to prove the digital currency's resistance to censorship by government and law enforcement. Bitcoin is a peer-to-peer protocol, which means that transactions directly between two parties holding their own keys cannot be censored, making the current saga a test that’s being closely watched by Bitcoin’s most libertarian supporters. Motherboard previously reported on how the protesters are now working out how to distribute the donated Bitcoin safely. 

Large centralized exchanges that comply with regulations (and which most people use) are another matter entirely, however. Motherboard has confirmed that exchanges in Canada received guidance from law enforcement to blacklist addresses related to the protest. 

"Bitbuy has reviewed the Emergency order and received a number of crypto addresses from law enforcement," Torstein Braaten, head of regulatory affairs for Canadian crypto exchange Bitbuy said in an emailed statement. "We will conduct our own investigations and surveillance as part of our Compliance program and report as required by the Emergency order and FINTRAC [Financial Transactions and Reports Analysis Centre] requirements."

Braaten noted that exchanges like Bitbuy are already beholden to FINTRAC and this order doesn't fundamentally change any of the usual surveillance and reporting that the firm conducts. "That being said, it may bring attention that some unregulated crypto trading platforms may be conducting business in Canada outside of the rules required by Canadian firms," Braaten said.

A spokesperson for Bitbuy said that the exchange was advised by the RCMP not to share the document. A copy of the document obtained and reported on by the Globe and Mail shows that more than 30 addresses were singled out by the agency in the order, the paper reported. “Any information about a transaction or proposed transaction in respect of these address(es), is to be disclosed immediately to the Commissioner of the Royal Canadian Mounted Police,” the letter states, according to the Globe and Mail.

The RCMP did not respond to a request for comment. 

Justin Hartzman, CEO of Canadian exchange Coinsmart, said the exchange also received guidance from the RCMP via its external anti-money laundering compliance partners and counsel. 

"It's a general glaring comment right now that we have to comply with what's going on," Hartzman said. 

"At the end of the day, you can try and do a peer-to-peer situation and try and skirt around a regulated entity like ourselves, or go to a non-regulated entity and hope they do it, but it's going to be tracked anyway," Hartzman said, referring to the recent arrest of a couple accused of conspiracy to launder billions of dollars in Bitcoin stolen in a 2016 hack. "At some point, somewhere, someone is going to hit a centralized exchange, and there's going to be an account associated with that."

Coinberry, another crypto exchange in Canada, told Motherboard that it received guidance banning regulated exchanges from interacting with addresses linked to the protest. 

"Coinberry has recieved communications that appear to embody a request of this nature," CEO Andrei Poliakov said in an email. "At this time, we are evaluating our options and the basis with which this request has been made. Coinberry will continue to prioritize our users' right to privacy and will make every effort to protect our users from any form of overreach or unlawful action which may infringe on their rights." In a follow-up email, Poliakov said he could not elaborate further on the source of the request or its nature. 

"It is unfortunate that the Emergency Economic Measures Order is indiscriminately targeting the whole cryptocurrency ecosystem,” Hartzman said. “The addresses associated with this alert have been widely disseminated to the entire crypto community here in Canada and have reportedly been reported to the blockchain monitoring softwares that service the industry worldwide. We will cooperate with the OPP and the RCMP and fulfill our obligations, if any, under the Emergency Economic Measures Order."

So far, the plan to distribute Bitcoin to protesters (which is still taking shape) has focused on getting recipients to create Bitcoin wallets and having the funds sent directly to them. The last update from the person leading the plan's construction is that funds could be delivered "mid next week," they said in a tweet. 

Update: This story was updated with additional comment from Coinsmart CEO Justin Hartzman.