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Centralized Exchanges Cannot Protect Customers From Government, Says Kraken CEO

2 mins
Updated by Ryan Boltman
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In Brief

  • Kraken CEO revealed that CEXs can’t protect users against government regulations.
  • Around 34 Bitcoin wallets belonging to protesters in Canada have seen their wallets frozen.
  • The recent moves by the authorities shows how important decentralization is for financial freedom.
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The CEO of Kraken, Jesse Powell, has stated that centralized crypto exchanges might be forced to comply with orders if law enforcement should ask that some digital assets be frozen. 

This was in reply to a user who wanted to know whether Kraken would comply with a police request to freeze assets without judicial consent.

CEXs under government regulations

This statement came in view of the Canadian government’s decision to blacklist 34 crypto wallets connected to the Freedom Convoy. By blacklisting the wallet, the Royal Canadian Mounted Police now has the power to freeze any funds sent from the wallets to a regulated exchange. 

The move by the Canadian government is the latest in a series of efforts to end anti-vax protests that have been on for several weeks now. To end the protest, Prime Minister Justin Trudeau invoked the Emergencies Act and expanded it to cover Cryptocurrencies.

This was after protesters switched to crypto donations due to centralized crowdfunding platforms such as GoFundMe and GiveSendGo discontinuing donation campaigns for the protest. The move has been criticized by many, including stakeholders in the crypto sector and democracy advocacy groups.

According to Powell, this move is a sign that due process for plebs. He added that “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.”

He further advised people not to keep their crypto funds in centralized and regulated custodians. These exchanges can’t protect users from any government action, so it’s better to use only trade P2P, he said.

Powell’s statements echo the concern of other stakeholders in the industry. Last Tuesday, Coinbase CEO Brian Armstrong also mentioned the importance of self-custodial wallets in a situation like this.

While there are many criticisms of the current situation in Canada, it also shows how important decentralization is for financial freedom. Though authorities can censor crypto wallets connected to centralized exchanges, crypto-assets themselves remain censorship-resistant. Thus, P2P transactions can’t be frozen.

Some see this moment as a good time for the crypto industry. Bitcoin Analyst, Plan B believes that this situation could be a major catalyst for the rise in the value of cryptocurrency.

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Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.
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