In early February, with the snowy streets of Ottawa’s downtown full of big rigs and protestors, Nicholas St. Louis, a local physiotherapist and the trucker convoy’s self-described “Bitcoin team lead,” posted a YouTube video in which he sang the digital currency’s praises.

Bitcoin would let the protesters, who’d gathered to oppose COVID-19 public health restrictions and air a host of other grievances, “receive global donations without any obstruction,” St. Louis told the camera. A few days earlier, the crowdfunding site GoFundMe had shut down an effort that had raised over $10 million to support the protests. A Bitcoin fundraiser was St. Louis’ proposed solution. According to documents later filed in court, he believed it was effectively beyond the reach of the law: “Uncensorable, permissionless and when you custody it properly it is unconfiscatable.”

Little did he know that three police forces including the RCMP, the federal government, and a team of civil litigators were about to challenge that belief.

Crypto’s use by both sides in Russia’s invasion of Ukraine dominates the headlines today, but the shockwaves from Canada’s legal crackdown on the protestors’ use of cryptocurrency continue to ripple through the global crypto community. St. Louis, who organized one of several crypto fundraisers to support the convoy, is now both a suspect in an RCMP criminal investigation and a defendant in a multimillion-dollar proposed class-action lawsuit.

Police raided his apartment to seize the “private keys,” or passwords, for the donated Bitcoin as part of the criminal probe less than an hour after a judge hearing the civil case separately ordered he must hand the digital currency over to an escrow agent. In an affidavit filed in court, St. Louis said he had been “ready, willing and able” to turn the funds over to escrow, denied the donations resulted from criminal conduct, and argued that the police acted in contempt of court for the raid.

Canada’s reaction to the Bitcoin protest fundraisers is a real-world test of one of crypto’s core, radical concepts: that money should be an extension of free speech. “People in crypto believe, rightfully, or wrongfully that it is, and always should be, regardless of the use case,” said Brian Mosoff, chief executive officer of Ether Capital. “There are real conversations that I think need to be had—as citizens, as regulators, as governments—on what the future of money is going to look like.”

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Bitcoiners appeal to a vision of the future where the digital currency allows refugees to flee repressive regimes with their wealth intact, and dissidents to fund protest movements against authoritarians. In some ways, that future has arrived, as evidenced by reports of Ukrainians who have escaped the invasion with their wealth in crypto—although critics accuse Bitcoiners of overstating such use cases to justify its less savoury ones.

The legal efforts in Canada in response to the convoy protest call into question its ability to scale as a tool for censorship resistance.

Elected officials, lawmakers and civil litigators have reacted to the convoy fundraisers with sledgehammers: invoking the Emergencies Act, launching a criminal investigation and having the courts slap a Mareva order on the funds, making it illegal to move them while their future is contested in a potential class-action lawsuit. As The Logic first reported, the Ontario Securities Commission notified police about tweets made by the CEOs of two prominent international cryptocurrency exchanges who appeared to offer advice on how crypto users could evade emergency restrictions on funding for the protests to the police.

The legal pushback has exposed two weak points in particular: the way the technology on which cryptocurrencies are built let observers trace their movement and provenance, and the need for cryptocurrency exchanges to convert Bitcoin and its ilk into actual spendable money. 

Law enforcement and the plaintiffs’ lawyers have had their jobs made easier by the fact all cryptocurrency transactions are visible on their respective blockchains and searchable by the public through “blockchain explorers,” websites that post records of blockchain activity online.

That makes it possible to create tools such as this online tracker, which shows about half of the “paper wallets” containing Bitcoin that fundraising organizers handed out to truckers have been claimed, with 15 making at least one additional transaction. Documents filed in connection with the proposed class action suggest the Mareva order and other legal pressure are having the intended effect, with little evidence any of that Bitcoin or other cryptocurrency raised through campaigns flagged by law enforcement has been converted into dollars.

Court documents and a report prepared exclusively for The Logic by Vancouver-based analytics firm Blockchain Intelligence Group reveal cryptocurrency raised in support of the convoy protests ended up on at least eight crypto-trading platforms: Coinberry, Binance, Bitmex, Coinbase, Crypto.com, WazirX, Luno and Wyre. Moving the cryptocurrency to an exchange is, in most cases, a necessary step before converting it into dollars or trading it for a different cryptocurrency, unless the holder makes an arrangement to trade it with someone directly. 

(Darren Weiss, a spokesperson for Crypto.com, told The Logic the platform “is compliant with all Canadian regulations, including the Mareva injunction”; Luno declined to comment, and none of the other platforms responded to requests for comment.)

There are various tools and tactics, such as privacy mixers, that can make it more difficult for people to trace where cryptocurrency originated and ended up. Michael Fasanello, the former director of training and regulatory affairs at Blockchain Intelligence Group, said the convoy fundraiser doesn’t appear to have made use of them, however.

The often-repeated concept that cryptocurrency is useful to criminals because they’re difficult to trace is a myth, Fasanello said. “Depending on the circumstances, it can be extremely transparent and very traceable.”

John Paul Koning, a Montreal-based financial blogger and a columnist with the cryptocurrency news outlet CoinDesk, said Canada’s regulatory regime for cryptocurrency-trading platforms likely helped make the various freezing orders on the Bitcoin raised in support of the convoy effective. The past year has seen Canadian securities regulators assert jurisdiction over the sector, including platforms based outside the country—giving them oversight over key infrastructure people need to turn crypto into money they can actually spend.

Koning said Russia, a country affiliated with about three-quarters of global ransomware revenue, according to blockchain analytics firm Chainalysis, provides an interesting counterexample. Somewhat ironically, cryptocurrency’s censorship-resistant properties work better in countries where the sector is less regulated, he said.

“Bitcoin is not as good as its marketers claim it to be at being a censorship-resistant payment rail,” Koning said. “The exchanges are key to making the stuff useful. You’ve got to sell it somehow.”

Andrea O’Sullivan, a Bitcoin proponent and director of the Center for Technology and Innovation at the pro-free market James Madison Institute in Florida, said the effectiveness of Canada’s freezing orders simply underscores the importance of learning to use the technology properly, rather than thinking of it as a magic bullet for defeating government overreach. She said Canada’s reaction to the convoy fundraiser—cutting off people’s access to the financial system under emergency orders, which she called “shocking”—demonstrates why censorship-resistant digital money is important in the first place, making believers out of some longtime critics.

“We have people that bat their eyes when the targets of these controls are seen as justified,” she said. “Even though the powers have been largely rolled back … people realize this could happen again.

But for people who don’t mind holding on to their bitcoins rather than selling them, another piece of Bitcoin’s censorship-resistant infrastructure has held up remarkably well to the legal pressure in Canada. So-called self-hosted or non-custodial wallets—the crypto equivalent of taking cash out of an ATM and storing it under your mattress rather than keeping it in a bank account—have proven to be an effective way to keep digital assets from being seized without the cooperation of the wallet holder.

Another legal battle playing out in Canada may prove an important test case for this. After a teenaged University of Waterloo math student allegedly hacked US$16 million from the DeFi protocol Indexed Finance in October, lawyers for plaintiffs in a proposed class-action lawsuit won a court order freezing the funds, similar to the Mareva injunction on the convoy fundraiser. There is a warrant out for the arrest of the suspect.

If the stolen funds were in a regular bank account, the court could order the bank to relinquish them; if the court could locate the hacker, it could compel him to give up the password, or private keys, to the cryptocurrency under threat of jail time. However, since the funds are in a self-hosted wallet and the person who holds the private keys is nowhere to be found, there’s not much the court can do.

“In the crypto context, we’re really dependent on compliance by the individual defendant in a way that isn’t true of freezing orders in a traditional finance context,” said Stephen Aylward, a lawyer at the Toronto-based firm Stockwoods, who is representing the plaintiffs in one of two class-action lawsuits related to the hack. “It raises a lot of challenges for any kind of traditional legal regulation of the flow of funds.”

It’s a point underscored by an email the makers of the non-custodial Nunchuk wallet sent in response to a notice of the convoy-fundraiser Mareva order.

“We do not collect any user identification information beyond email addresses. We also do not hold any keys. Therefore: We cannot “freeze” our users’ assets…. This is by design,” the email reads. “Please look up how self custody and private keys work. When the Canadian dollar becomes worthless, we will be here to serve you, too.”

The notion of government-issued currencies one day becoming worthless and being replaced by Bitcoin is another belief held by its most ardent backers. The mixed results those grand claims have yielded when put to the test in Canada isn’t deterring them.

St. Louis, who handed out paper wallets to protesting truckers, is still a believer, if his Twitter feed is any indication. His pinned tweet is a link to yet another Bitcoin fundraiser—this time, for his own legal defence.

“Freedom is worth fighting for, but it’s not free,” the webpage for the fundraiser reads. “Thank you all for your support and your love.”