Canada became the first country that signed a national law regulating bitcoin and other digital currencies. Still, some in the community think the legislation comes too early and is not necessary as the virtual currency is in its infant stage yet. The bill will definitely influence the bitcoin business in Canada.
Bill C-31, known formally as “An Act to Implement Certain Provisions of the Budget” Tabled in Parliament on February 11, 2014, received royal assent on June 19th. The law is still to be approved until the official enforcement.
The amendment names bitcoin as businesses “dealing in virtual currencies”. It is anticipated to regulate bitcoin exchanges and ATMs as well. After the enforcement, the law would regulate bitcoin as money services businesses (MSBs).
The law reads: “Division 19 of Part 6 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things, enhance the client identification, record keeping and registration requirements for financial institutions and intermediaries, refer to online casinos, and extend the application of the Act to persons and entities that deal in virtual currencies and foreign money services businesses.”
Under the law, all businesses dealing with digital currency have to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Christine Duhaime, a financial crime and certified anti-money laundering specialist in Canada, noted in her assessment that bitcoin companies would not be allowed to open bank accounts if they are not registered with FINTRAC.
“[The law applies to] bitcoin businesses in Canada providing services to Canadians, but it also applies to ones outside of Canada targeting Canadians … For bitcoin businesses outside Canada, the correspondent banking relationships will apply, meaning that banks anywhere basically will have to make sure that when they’re providing bitcoin services that those bitcoin services are compliant with the law in Canada,” Duhaime told CoinDesk.
The vice president of AML at Bitcoin Strategy Group consultancy in Canada, Amber Scott, said: “This will affect anyone serving Canadian customers in Canada. For example, if you’re a Dutch company offering ATMs in Holland, and I as a Canadian buy BTC from an ATM in Holland, there’s no impact. But, if the same company offers an online exchange and I access that exchange from Canada, they’re captured under the law.”
She added: “The penalties for non-compliance can be fairly significant. In addition to the financial implication, the regulator also has the ability to publish the names of companies found to be in violation (which is generally the kiss of death as far as maintaining or establishing any banking relationships).”
The reaction of the international bitcoin community to this amendment is still to be seen.