Kraken CEO Jesse Powell has taken to Twitter to warn crypto enthusiasts of the limitations of centralized exchanges and explain their role.
His comments were prompted by the Canadian government announcing it will blacklist 34 different cryptocurrency wallets and funds going to the protestors.
This spurred internet debate about the censorship resistance of cryptocurrencies. One Twitter user wrote to Powell saying that if the government told him to, he would lock people’s accounts and stop them from using their funds.
Powell responded: “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.”
This message came as a shock to many because he is essentially telling users to avoid exchanges, like Kraken.
The truth is, when users hold their coins or tokens on a centralized exchange, they no longer control them. While they may be credited to their account, they do not hold access over them, and any withdrawal or trade will be facilitated by the exchange.
Users of centralized exchanges do not own their wallets or hold the private keys to wallets on exchanges and as digital currency holders say, “not your keys, not your coins”.
Many exchanges in recent years have pushed for more users to store their funds on their platforms. Staking opportunities, lending opportunities, bonuses and other tactics have been used to keep users from withdrawing their assets. Some platforms like PayPal and Revolut, do not allow users to withdraw their funds at all.
Non-custodial wallets like Metamask or hardware wallets give users complete control over their funds. Their funds cannot be frozen or removed without their consent.
Scam projects and hacks can lead to loss of funds, but no government entity can reach in and confiscate your assets.
Peer to peer and other decentralized methods of trading have continued to grow. Uniswap and other decentralized exchanges have exploded in volume as many avoid centralized exchanges. Bitcoin ATMs have made appearances in many countries and give users a decentralized way to withdraw coins to fiat.