New Canadian crypto regulation will treat crypto exchanges and payment processors as money services businesses.
On June 9, Canada’s Department of Finance released a draft of official regulations for cryptocurrency exchanges and payment processors.
According to the draft, these regulations are in response to “a number of deficiencies” found in a 2015-2016 evaluation of Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime (AML/ATF) conducted by the Financial Action Task Force (FATF), an intergovernmental organization that tackles money laundering. Regulatory changes were also necessary to adhere to 2014 and 2017 legislative standards that addressed money laundering and terrorist financing.
Under the new regulations, persons and entities dealing in virtual currency exchange services and value transfer services will be considered financial entities or money service businesses (MSBs). They will be obligated to comply with AML/ATF regulations, to meet FATF standards, register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and report any transaction over 10,000 Canadian dollars to the Department of Finance. The regulations also stipulate that the know your customer maximum is set at 1,000 Canadian dollars, meaning private traders cannot conduct business that involves individual transactions greater than that amount unless they provide their personal information. According to the draft:
“These amendments serve to mitigate the money laundering and terrorist activity financing vulnerabilities of virtual currency in a way that is consistent with the existing legal framework, while not unduly hindering innovation.”
The draft also includes a cost-benefit section. Even though the estimated cost of 61 million Canadian dollars greatly outweighs the 1.8 million dollar benefit, the Canadian Department of Finance is hopeful that there will be “substantial qualitative benefits […] that cannot be monetized.” The Department of Finance stated that it hopes these regulations will strengthen Canada’s AML/ATF efforts, improve Canada’s compliance with FATF international standards, improve the country’s international reputation, and make it “easier for Canadian businesses to operate internationally.”
Not everyone is so happy about these new regulations. In a tweet about the new regulations, Francis Pouliot, co-founder of Montreal-based blockchain consulting firm Catallaxy, voiced his dissent:
Nathan Graham is a full-time staff writer for ETHNews. He lives in Sparks, Nevada, with his wife, Beth, and dog, Kyia. Nathan has a passion for new technology, grant writing, and short stories. He spends his time rafting the American River, playing video games, and writing.
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