Canadian Regulators Investigate Coinbase, Kraken CEOs For Promoting Self-Custodial Wallets

The Ontario Securities Commission (OSC) recently flagged Brian Armstrong and Jesse Powell – CEOs of Coinbase and Kraken respectively – for tweets surrounding Canada’s freedom convoy protests. Each has been accused of offering advice on how to evade national financial emergency restrictions through the use of self-custodial crypto wallets.

Crypto CEOs Against Canada’s Government

According to a report from The Logic, Kristen Rose – the OSC’s manager of public affairs – said the commission is now “aware” of certain government-critical tweets from Powell and Armstrong. In an email, she told the newsroom that the RCMP and relevant authorities had been informed about the posts.

In recent weeks, both CEOs have made numerous tweets and retweets opposing Canada’s response to nationwide protests against covid-19 health restrictions. They’ve been especially critical of financial restrictions placed against those donating to the movement. One of these restrictions grants new power to financial service providers to freeze users’ accounts without a court order.

However, the OSC took particular issue when the exchange owners recommended that users self-custody their cryptocurrency, in the context of government actions. On February 15th, Armstrong called Canada’s new measures “concerning,” and provided a link to Coinbase’s self-custodial wallet, deeming it “important”.

Powell’s tweet the day prior was far more direct, recommending that convoy donors use non-custodial wallets.

“Crowdfunding platforms now regulated under the Canadian Terrorist Financing Act,” he said.  “Do you see where this is going? Please do not fund causes directly from custodial wallets. I’m sure freeze orders are coming. Withdraw to non-custodial before sending.”

Powell himself has directly sent money to ‘Bitcoin for Truckers’ – a protest fundraiser that used Bitcoin-native crowdfunding platform TallyCoin. After amassing nearly $1 million in crypto for the convoy, the page has since been taken down, and its organizers are facing legal charges.

The Self-Custody Workaround

Bitcoin was fundamentally designed as a “peer-to-peer system of electronic cash” which doesn’t require third parties to mediate payments. This makes transactions using privately held Bitcoin very difficult for financial regulators to prevent.

By contrast, coins held with exchanges or custodians are just as easy to freeze as fiat money held at a bank. Despite his opposition to the restrictions, Powell said his exchange would reluctantly agree to freeze funds at the government’s request. As such, he directly advised concerned Kraken users to withdraw their money, and only donate through p2p transactions.