It’s a fact that due to the cryptographic nature of cryptocurrencies, it is impossible for a government or any other entity to confiscate your coins without your cooperation. This property alone is enough to make crypto attractive to people who might have legitimate doubts about the safety of their assets, when they’re kept in a bank or at any regulated third party.
Not only that these regulated entities can seize your assets or go bankrupt and leave you holding an empty bag, but they also have the power to freeze your life savings at the first sign of noncompliance with the government.
On top of that Bitcoin and other crypto assets may offer an alternative to fiat currencies, especially due to Bitcoin’s deflationary and censorship-resistant properties. Leading proponents even describe Bitcoin as "digital gold", since it shares many of its qualities with his older brother.
On the one hand some people around the world are looking for a hedge against inflation in crypto nowadays, while on the other hand more and more people are getting to know the flaws of traditional intermediaries in practice. Here I am pointing to recent events in the Ukraine and Russia, as well as what has been happening in Canada, such as GoFundMe freezing millions of dollars raised for Canadian truckers.
Let’s take a look at a few instances of governments (directly or through institutions) laying their hand on other people’s property and examine what you can do to prevent that from happening to you.
What has been happening in Russia?
Having invaded Ukraine, Russia got introduced to a barrage of comprehensive sanctions. On top of sanctions directed to the Russian central bank together with other Russian institutions and entities, G7 and other EU countries (that aren’t included in G7) also targeted so-called ‘Russian oligarchs’.
“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets. We are coming for your ill-begotten gains.” This is how Joe Biden addressed the oligarchs during his State of the Union speech last week. Besides getting their assets in foreign banks freezed, billionaire businessmen perceived to be in President Vladimir Putin's inner circle also had their physical assets such as yachts or real estate seized.
Whether or not you agree with these measures, which will supposedly help push Putin into a corner, these actions should serve as a warning sign that you could easily be punished the same way if you don’t act preventively. If history can teach us anything, it is that governments will eventually become more and more authoritarian as they gather more and more power.
Sooner or later you might have an opposing view on a particular subject, therefore it’s essential to possess the tools that at least mitigate the damage that may be done to you and going crypto can give you an unique edge.
What kind of an edge are we talking about?
During last month (February), there was lots of coverage of the Canadian trucker convoy that stalled trade and traffic between USA and Canada in order to protest Covid-19 restrictions and vaccine mandates. Lots of people, who wanted to show solidarity and support, donated money to the protestors. Donations to the GoFundMe page "Freedom Convoy 2022" had reached 10 million Canadian dollars, which equals 7.9 millions USD and only a tenth has been released to organisers so far, since the crowdfunding website decided to withhold the donations.
Luckily the protestors managed to find a solution in crypto. In response to the GoFundMe blockade of the funds, a Canadian bitcoiner group known as "HonkHonkHodl" started a campaign on crypto crowdfunding platform Tallycoin. According to protests organisers, more than 5,000 people have pledged about 21 bitcoin, which means they’ve successfully raised almost a million dollars in Bitcoin.
In response to the unrest, the authorities have ramped up their efforts to cut funding for the trucker convoy, hence they deployed the Emergencies Act, which directly targets cryptocurrencies. Federal and provincial police ordered all regulated financial firms to cease facilitating any transactions from 34 crypto wallets tied to funding protests, which could potentially make it more difficult to cash out these digital currencies and use them.
Can the government seize my crypto?
Governments have been eagerly trying to trace the circulation of Bitcoin and other cryptocurrencies. It’s important to note that despite the popular reputation of most cryptocurrencies as anonymous, most cryptos are not anonymous, but rather only pseudonymous. This means that anyone can link transactions to fixed wallet addresses, and by keeping a public record of every single transaction ever made on their chains, most popular cryptocurrencies provide national governments with an almost perfect means of keeping tabs on our financial activity.
The problem arises when regulated exchanges are legally required to follow strict know-your-customer (KYC) policies. This provides a link between crypto user’s real-world identity and transactions recorded on-chain. Taking into account that exchanges are required to supply this info to the government, this puts every user that makes transactions via regulated exchanges into a potentially vulnerable position.
The solution is to either migrate to one of the so-called privacy coins or abandon regulated centralised exchanges. This can be done in two ways. The first option is to use CEXes (centralised exchange) that don’t require KYC, which makes it more difficult for authorities to link your transactions to your real identity. The second option is to transact via DEXes (decentralised exchanges), where transactions occur directly between crypto traders (without third party intermediaries). On top of all that, it’s advised to keep the majority of your digital assets stored securely in cold storage while having a bare minimum amount of coins that you want to trade or transact frequently stored in a custodial wallet for the sake of convenience. You can read more on how to secure your funds in one of our previous blogs.
This combination puts you in charge of your assets and makes you immune to previously outlined troubles that could be caused by government or any other intermediary institution (usually through government). Many professionals in the crypto field believe that having your crypto stored offline, while only transaction through decentralised exchanges is crucial for keeping your funds SAFU. Additionally we would like to recommend taking these security measures preemptively, before your funds get compromised and it’s too late.
