Bitcoin got serious , Canada makes law for it !
At the end of this week, the Parliament of Canada approved what is likely the World’s first National Bitcoin Law, and certainly the world’s first treatment in law of Bitcoin under national anti-money laundering law.
This late Thursday, Canada’s General Governor gave Royal Assent to Bill C-31, An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014 and Other Measures (“Bill C-31“). Bill C-31 amends Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (“PCMLTFA“) to legislate over Bitcoin as a matter of anti-money laundering law.
So what they changed ?
There are 5 important changes in Bill C31 related to Bitcoin .
- Regulates Bitcoin as MSB – Bitcoin dealing, more specifically referred to as “dealing in virtual currencies” in Bill C-31, will be subject to the record keeping, verification procedures, suspicious transaction reporting and registration requirements under the PCMLTFA as a money services business.
- Does not define “dealing in virtual currencies” – The phrase “dealing in virtual currencies” was left undefined and it is not known what the defined term will encompass in terms of business activities once defined by regulation.
- Registration with FINTRAC – Bitcoin Dealers will be required to register with FINTRAC and if successfully registered, to implement a complete anti-money laundering compliance regime.
- Captures foreign Bitcoin companies targeting Canada – Bill C-31 extends to: (a) entities that have a place of business in Canada; and (b) entities that have a place of business outside Canada but who direct services at persons or entities in Canada. Bitcoin businesses in Canada, however, that provide services to persons or entities outside of Canada are exempt from Bill C-31 for those external services.
- Prohibits banks from opening accounts for Bitcoin entities if unregistered – Under Bill C-31, banks will be prohibited from opening and maintaining correspondent banking relationships with Bitcoin dealers that are not registered with FINTRAC. This is an extremely important aspect of Bill C-31 and Bitcoin businesses should ensure they understand what a correspondent banking relationship is and how it can affect the provisions of banking services to them.
When the new law is brought into force, what the changes mean for Bitcoin businesses internationally that target Canadians and Canadian Bitcoin businesses, is that they will be required to obtain specialized AML legal advice to be sure of that their Business Model is in legal terms. Canadian economic sanctions, the counter-terrorist financing regime and new Canadian politically exposed person regime in the Bitcoin legal environment is exceedingly complex and most regulators around the world openly admit they struggle with enforcing these aspects of AML law in Bitcoin. The former two (sanctions and terrorist financing) have always applied to Bitcoin entities worldwide.
The government’s decision to subject certain digital currency businesses to this law is not without advantages. Now digital currency businesses, especially digital currency start-ups looking to operate in Canada and or service the Canadian market are closer to knowing what framework they must adhere to. Theses amendments may also facilitate business relationships with banks, who have been generally opposed to opening bank accounts for businesses involved with digital currency. With the added certainty of regulation, banks should be more comfortable now that they know the anti-money laundering compliance requirements. At least one bank executive has expressed an openness to dealing with bitcoin businesses provided digital currency is more clearly regulated.
We know from Senate hearings that the Act will cover digital currency exchanges but not individuals or businesses. However, we continue to wait for much needed clarification as to what other businesses will be subject to the Act.
Bitcoin “Dealer” or Exchanges as we know them will have to comply with the new Canadian laws that will require a lot of investment and seriousness from business owners , and that would be amazing to be honest cause it will make Bitcoin market a lot safer for all users as if it happens something with the exchanges it can be easy traced down and take responsibility .
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.