Coinbase, Kraken CEOs’ tough talk holding back digital currency adoption

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The CEOs of cryptocurrency exchanges Coinbase and Kraken may find out the hard way that there’s a price to be paid for talking tough on Twitter.

Late last week, reports surfaced that the Ontario Securities Commission (OSC) had contacted Canadian police regarding tweets by Coinbase CEO Brian Armstrong and Kraken CEO Jesse Powell. The tweets criticized Prime Minister Justin Trudeau’s invocation of the Emergencies Act to resolve the ongoing occupation of downtown Ottawa and the blockading of several Canada-U.S. border crossings by a motley group of protesters.

Among the powers authorized under the Act is the government’s ability to direct financial institutions—including cryptocurrency exchanges—to freeze accounts without a court order, while granting these institutions immunity from potential civil actions by the individuals/entities associated with those accounts. The move was intended to cut off funding—much of it from foreign sources—to campaigns set up to fuel the so-called ‘trucker’ protest that paralyzed the nation’s capital and seriously disrupted cross-border trade for several weeks.

Armstrong and Powell’s tweets urged customers to avoid custodial digital currency wallets to make it more difficult for the government to enforce its new authority. It’s these recommendations that could have serious repercussions for the American crypto cheerleaders as Canada crafts its digital asset regulatory roadmap.

OSC public affairs manager Kristen Rose told the Leader-Post that Armstrong and Powell’s tweets had been shared with the Royal Canadian Mounted Police and “relevant federal authorities.” Not content to have already poked the bear, Powell upped the ante by tweeting that Kraken would be “forced to comply” with orders to freeze assets and again urging Kraken customers to “get your coins/cash out and only trade p2p.”

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.

— Jesse Powell (@jespow) February 18, 2022

Legal eagles are suggesting that Armstrong and Powell’s comments probably won’t result in criminal proceedings against either CEO—although Powell’s personal donation to the ‘truckers’ cause may leave him more vulnerable—but should we learn that their public sympathies led to private actions that enabled targeted customers to dodge the new restrictions… well, all bets are off.

Even if it doesn’t rise to the level of criminal prosecution, regulators can be sensitive to having their orders publicly undermined in this fashion. It’s not hard to imagine these companies’ activities—including, say, Coinbase’s model of listing tokens in which it holds a sizeable (and often undisclosed) ownership stake—now coming under additional scrutiny.

Echo chamber of commerce

Armstrong and Powell’s tweets were fairly representative of the overall digital currency sector’s negative response to Trudeau’s actions and, frankly, were fairly predictable given the anti-authority bent of most laser-eyed BTC maximalists. They were also starkly removed from the opinion of a significant majority of Canadians who may or may not support Trudeau’s Liberal party but just wanted public officials to do whatever it took to rid the nation’s capital of these occupiers.

The fact that few crypto bros recognized how out of step their ‘freedummmmbbbb’ cries were with mainstream society may have had to do with how few of them are Canadian and therefore weren’t on the receiving end of this protest. But it’s also a reflection of how much time they spend in their self-reinforcing media silos, in which seldom is heard a discouraging word and the BTC fiat value isn’t cloudy all day.

Take Tesla boss/Doge-pumper Elon Musk, who tweeted a meme comparing Trudeau to Hitler, which earned him a public rebuke from Jewish groups for trivializing the Holocaust. Never mind that some protesters have been linked to white supremacist movements or make videos claiming that the “Anglo-Saxon race” has “the strongest bloodlines.” Clearly, Trudeau’s the genocidal brownshirt in this situation.

Some of the protest organizers have demonstrated an equally questionable comprehension of reality as their crypto brethren. In a bail hearing this weekend, Dwayne Lich—husband of Tamara Lich, who started the convoy’s GoFundMe campaign that was shut down by the site after the demonstration grew into an occupation—told the judge that the protest was “part of our first amendments.” When the judge asked why Lich was referencing the American constitution in a Canadian courtroom, Lich pleaded ignorance: “I don’t know. I don’t know politics.”

Just as Lich seems to have spent too much time in “USA! USA!” Facebook groups to know his political ass from his elbow, a lot of crypto bros spend their days in conversations in which everyone’s in lockstep agreement on the righteousness of their cause and the utter brilliance of their worldview.

This seems to have blinded the likes of Armstrong and Powell to the fact that code isn’t law, that BTC doesn’t magically fix everything and the rules of the road—as unwelcome as they may be—still apply to them. Until they acknowledge these truths, they will continue to be their own worst enemies and a major impediment to the wider adoption of the utility-free technology they promote.

But hey, given that this strategy might encourage people to check out a blockchain that can actually do something other than lie there waiting for some greater fool to come along and take these hot potato tokens off your hands, maybe the likes of Armstrong and Powell are doing the Lord’s work after all.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.