For the first time, the Canadian government has invoked the Emergencies Act of 1988, forcing banks to freeze financial accounts of individuals involved in protesting against COVID vaccine mandates. Trudeau’s action is targeted at truck drivers who have been protesting a new mandate that requires them to be vaccinated to cross the U.S.-Canada border.
The statute’s activation is also accompanied by more stringent anti-money laundering guidelines for payment providers and financial transactions of cryptocurrencies. Fortunately, Rep. Warren Davidson (R-Ohio) introduced the Keep Your Coins Act (H.R. 6727) to protect cryptocurrency transactions from government intervention.
Last week, Canada’s Deputy Prime Minister and Minister of Finance Chrystia Freeland stated in a press conference that:
A bank or other financial service provider will be able to immediately freeze or suspend an account without a court order.
Freeland said at the press conference that new anti-money laundering enforcement would also apply to cryptocurrencies:
We are broadening the scope of Canada’s anti-money laundering and anti-terrorist financial rules, so they cover crowdfunding platforms and the payment providers they use. These changes cover all forms of transactions, including digital assets such as cryptocurrencies.
Rep. Davidson’s bill would prohibit any federal agency from restricting consumers from being able to use their cryptocurrencies for transactions. The bill would also prevent federal agencies from unilaterally prohibiting holders of cryptocurrencies from conducting “transactions through a self-hosted wallet.”
The legislation prevents the federal government from intervening in financial decisions that American households make every day. In light of recent actions in Canada, this bill is needed now more than ever.
The precedent set by the Canadian government’s actions are not to be taken lightly in the United States. The Biden administration could also try to pursue the same policies if deemed necessary. That is why it is important for Congress to act ahead of time and pass legislation that preempts any executive overreach that infringes on Americans’ civil liberties.
Trudeau’s actions should also raise concerns about the development and operation of a central bank digital currency (CBDC) in the United States. The Federal Reserve’s report on CBDCs explicitly acknowledges that consumers’ privacy needs to be protected, but it also says it must be balanced with “the transparency necessary to deter criminal activity.” Achieving these two goals simultaneously is impractical. Once a CBDC is launched, the Fed will also likely have a hard time protecting personally identifiable information (PII) from hackers or be forced to share PII with other federal agencies, such as the Treasury Department, to enforce tax compliance.
The Fed and academic literature indicates that a CBDC will likely provide another tool to the IRS to increase tax enforcement. The Fed’s CBDC report states that “governments could use a CBDC to collect taxes.” A study from 2021 also concludes that “as long as CBDC offers less anonymity than cash” then the IRS would be able to more easily track down taxes that are owed. Although it is important to follow the law and punish bad actors, when necessary, the negative implications of allowing the government to track tax compliance with CBDCs has the potential to be abused. Depending on the final design of the CBDC, it could also crowd out private cryptocurrencies and assert total dominion over electronic payments in the United States.
Lawmakers from both sides of the aisle should support Rep. Davidson’s bill to ensure federal agencies do not overreach their statutory authority and protect household’s financial decisions and income from government intrusion.