Good News for Bitcoin in Canada

The Bitcoin community around the world have some good news to celebrate. On Friday, March 28, 2014, the Canadian government introduced proposed a number of key amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”). The proposed amendments are included in the 2014 Budget implementation bill, Bill C-31, the Economic Action Plan 2014 Act, No. 1, which implements certain provisions of the federal budget tabled on February 22, 2014.

The proposed amendments include provisions that would subject Bitcoin and other virtual currencies to the application of anti-money laundering rules in Canada. The spirit of the proposal is to subject to rules that will treat certain Bitcoin and virtual currencies operators like other money service businesses and foreign exchanges businesses. Such rules will subject certain virtual currency businesses to comply with record keeping, verification of identity, reporting of suspicious transactions and registration requirements under the Act.

The Bitcoin community should also celebrate the views expressed by Bank of Montreal (BMO) CEO Bill Downe that his bank would be open to doing business with Bitcoin if it is regulated and reliable. On the heels of the catastrophic collapse of Mt. Gox and its bankruptcy filing, the Bill C-31 and the announcement by BMO are best news for Bitcoin in 2014 so far.

The Bitcoin community around the world should not be surprised by the news coming out of Canada since Canada has a relatively progressive banking system and forward looking regulatory environment. If we go back to the 2008 financial crisis, Canada’s financial system was not as severely impacted as by the global financial crisis as those of other industrialized countries such as the United States and Great Britain. The World Economic Forum for example ranked Canada’s banking system as the soundest in the world. Our banks are profitable and well-capitalized. The regulatory framework for Canada’s financial sector is both more responsive and more prudent, in some respects, than that of the United States and other countries.

Bill C-31 and the support from the Canadian banking system will aid the development of Bitcoin and virtual currencies in Canada. Here are some of the key proposed amendments to our AML rules in Canada:

• application of the Act to persons dealing in virtual currencies
• application of the Act to money services businesses and persons trading in virtual currencies that do not have a place of business in Canada but provide services to residents of Canada;
• introduces new enhanced due diligence requirements for providing services to individuals that occupy certain prominent public functions within Canada or in international organizations where such individuals (or their prescribed family members or known close associates) are assessed as high risk;
• introduces a group-wide information sharing requirement between regulated financial institutions and their affiliates in Canada and in other jurisdictions that are also regulated financial institutions
• requires reporting entities to report to the Canada Revenue Agency international electronic funds transfers of C$10,000 or more

It should be noted that the terms “virtual currency” and “dealing in” virtual currencies are not defined in Bill C-31 and are anticipated will be done with specified by regulations from FINTRAC and made public at a later date.

The Government is following through on is commitment in the 2014 Budget to regulated Bitcoin and other virtual currencies. Bill C-31 provides some clarifications of the government’s intentions to regulate for Bitcoin and other virtual currencies. Under the proposed amendments, persons dealing in virtual currencies will be required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and comply with the Act.

What do you think?

Mark McKenzie is a leading Subject Matter Expert in financial services regulation and supervision as well as a professional motivational speaker, corporate trainer and youth mentor.  He can be contacted by email mastbmckenzie@gmail.com or by telephone 647-406-4622. Read my blog  http://mastbmckenzie.blogspot.ca/ and always write me a comment and share. Follow me on Twitter @mackynacky. Connect with me on www.youtube.com, Google+, Facebook and Linkedin.