Canada law recognizes digital currency firms as money services

Getting your Trinity Audio player ready...

Digital currency firms in Canada are now recognized as money service businesses by the Canadian government. On June 1, the amendments made to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act were made effective. One of these amendments added virtual currencies to this act, and as a result, digital currency firms must comply with the same laws that apply to money service businesses in Canada.

A long time coming

Regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act were originally passed in June 2019. But it wasn’t until June 1, 2020 that the laws became effective. The new amendments require digital currency firms in Canada to report all transactions over $10,000 among other requirements that will help prevent money laundering and terrorist financing.

This shows that the Canadian government believes digital currencies might be utilized as a vehicle to facilitate illicit activity. However, the addition of virtual currencies to the proceeds of crime and terrorist financing act also gave the digital currency industry in Canada government recognition and regulatory framework to abide by.

Some individuals, such as CEO of Canadian digital asset exchange BullBitcoin, Francis Pouliot, has been fighting for this government recognition of digital currencies for several years. 

Today is my last day as an unregulated dealer in virtual currency. As of June 1st 2020, Bitcoin exchanges and payment processors are officially regulated as Money Services Businesses in Canada.

Full circle 7 years after I started my career in Bitcoin lobbying on this very issue.

— FRANCIS – BULLBITCOIN.COM (@francispouliot_) May 31, 2020

Long story short: Bitcoin is officially regulated as money and Bitcoin businesses that handle custody of users funds are regulated like any business involved in currency exchange or payment processing.

— FRANCIS – BULLBITCOIN.COM (@francispouliot_) May 31, 2020

 

Digital currency firms and their operations have received government acknowledgment and regulation. This is positive for the industry, as many people previously referred to the digital asset industry as the Wild West or a grey economy that lacked legal frameworks and regulation.

Will other governments follow suit?

This move by Canada may prompt other governments to amend their laws to include digital currency businesses and operations; many governments have outdated legal frameworks that they try to apply to digital currency—which is not always the most effective way to tackle the nascent industry.

I went to prison for selling 9.998 BTC for $9260.80 USD in 2014, Unlicensed Money Transmission, which used the Banking Secrecy Act 1970 a 50+ year old law applied to #Bitcoin. The Patriot Act was also used in my case which was 8+ years before #BTC was ever made. Law needs fixing.

— Morgan Rockwell 🍄 (@NODEfather) May 31, 2020

Twitter user NodeFather replied to Puliot’s original tweet describing an incident in which Canada’s amended laws would have prevented his arrest. Since the digital currency industry had little to no legal framework at the time of his $9260.80 BTC sale in 2014, he was imprisoned on charges of conducting an unlicensed money transmission.

However, if more countries amended their laws like Canada recently has, NodeFather would have been protected by law. Several of the existing laws that governments try to apply to the digital currency industry are not the right fit for this new technology that operates unlike any other financial instrument we have seen in the past. However, Canada’s amendments to its Proceeds of Crime (Money Laundering) and Terrorist Financing Act are a step in the right direction.