Canada has taken an ambitious step by implementing a national law that would regulate bitcoin at the national level. People in community have debated whether these types of regulation are needed at the moment because Bitcoin is still such an infant technology. From the looks of it, the implementation of this bill may have come too soon and will definetely affect Bitcoin business in Canada.
Christine Duhaime of Duhaime law reviews the amendments Bill C-31 and how it amends Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
- 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 is more sweeping than other Canadian laws because it extends to: (a) companies that have a place of business in Canada; and (b) companies that have a place of business outside Canada but who direct services at persons or entities in Canada. Coinbase, for example, will have to register with FINTRAC to continue to provide Bitcoin services in Canada. Having a place of business means physically located in Canada, or having a R&R 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 internationally. Wegelin & Co., the richest and oldest bank in Switzerland shut down last year because it obtained numerous legal opinions on its banking operations but failed to obtain any specialized advice on the international application of anti-money laundering laws and it was prosecuted in the US for facilitating tax evasion. The hook was its correspondent banking relationships.
What you should take notice of is how companies incorporated in other countries will still have to register with FINTRAC to continue to provide Bitcoin services. This just creates more bureaucratic red tape that businesses will have to deal with. Setting up Bitcoin businesses will become even more cost prohibitive as those businesses will have to hire a ton compliance officers and lawyers.
How this will effect the further development of the Bitcoin community in the country should be seen in the coming months.
[textmarker color=”C24000″]Source[/textmarker] CA Parliament, Duhaime Law