In a move announced by the Canadian government, businesses “dealing in virtual currency” will now be regulated as Money Services Businesses (MSBs). This move comes from a desire to protect Canada’s financial ecosystem from money laundering and other terrorist financing activities, said the report. So far, Canada is one of the first countries to officially state how cryptocurrency businesses will be regulated - or if they should be regulated at all. This comes after months of debate within various levels of government.
Money services businesses in Canada are those that handle money but are not official chartered banks. Examples include foreign exchange services, money transfer services, or cashing/selling travellers cheques.
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“Persons and entities that are “dealing in virtual currency” would be financial entities or other entities deemed domestic or foreign MSBs, as the case may be,” said the report. “As required of all MSBs, persons and entities dealing in virtual currencies would need to implement a full compliance program and register with FINTRAC.”Under FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), companies are required to have complete Know Your Client (KYC) and Anti-Money Laundering (AML) policies, procedures, and reporting. MSBs are also required to report and disclose suspicious transactions, terrorist property, and large transactions, whether cash or electronic, said the report. “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,” said the report.
Canada is known as one of the most financially stable nations on the planet according to IMF analysis, and one of the only countries to not have bank shutdowns during the Great Recession of 2008. Much of this stability came with the trade-off of tight regulations and stringent reporting structures for chartered banks and MSBs. Bringing cryptocurrency into the mix is not new, as the Bank of Canada has already toyed with the notion of a Central Bank Digital Currency (CBDC), many regulatory players in Canada have voiced opinions about regulation, and the Ontario Securities Commission - arguably the most influential securities regulator in the country - committed to “innovative regulation” that will promote innovation but also protect investors.
This regulatory change, if amendments are fully accepted, would come into effect 12 months after their registration.
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