Crypto Exchanges To Be Regulated As Money Service Businesses In Canadabr>
An official draft of new regulations on crypto exchanges and payment processors has been released by the Canadian government.
According to the draft, the Financial Action Task Force (FATF) evaluated Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) regime between 2015 and 2016, and identified a number of deficiencies that the country needs to address. It is proposed in the draft that regulatory changes are needed to strengthen Canada’s AML/ATF regime and ensure its measures are aligned with the FATF standards.
“The proposed amendments to the regulations would strengthen Canada’s AML/ATF Regime by updating customer due diligence requirements and beneficial ownership reporting requirements, regulating businesses dealing in virtual currency, updating the schedules to the regulations, including foreign money service businesses (MSB) in Canada’s AML/ATF Regime, clarifying a number of existing requirements, and making minor technical amendments,” the draft states.”
Under the proposed amendments, crypto exchanges and payment processors will be considered as MSB and will be required to report large transactions over $10,000 CAD ($7,700 USD). They will also be required to setup a new KYC threshold at transactions of $1,000 CAD ($770 USD). The draft also contains a cost-benefit analysis, which reveals the regulations would cost about $61 CAD million ($47M USD) over the next ten years.
“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,” the draft states. “For this reason, the amendments are targeted at persons or entities engaged in the business of dealing in virtual currencies, and not virtual currencies themselves.”
Francis Pouliot, co-founder of Montreal-based blockchain consulting firm Catallaxy, argues that the new requirements for crypto companies would be very difficult to implement.
“New requirement: ‘Large Virtual Currency Transaction Record’ means businesses required to ask for and keep details of every transaction over $10,000 like large-cash transaction reports,” he said. “That’s going to be extremely difficult and invasive to implement. I will object to this.”
FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist activity financing and other related threats to the integrity of the international financial system. These policies are not legally binding, but the Canadian government said the country is obligated to implement them and to submit to a peer evaluation of their effective implementation.
“Not meeting this commitment could lead to a number of sanctions, from enhanced scrutiny measures to public listing and, in the extreme, suspension of membership from the FATF,” the government said. “Furthermore, non-compliance could cause serious reputational harm to Canada’s financial sector and subject Canadian financial institutions to increased regulatory burden when dealing with foreign counterparts or when doing business overseas.”