In Quebec, a business that operates a virtual currency automated
teller machine, such as a bitcoin ATM, or that provides a platform
for trading virtual currencies, will now be required to obtain a
license under the Money-Services Businesses Act (the
"Act"). On February 12th, 2015, the
Autorité des marchés financiers (the
"AMF") announced this change in a news release and published amendments to the Policy Statement
to the Act, which clarified that "making available to the
public a means of purchasing, with cash, virtual money from an
automated distributor, without the intervention of a natural
person" constitutes operating an automated teller machine for
the purposes of the Act.
In the past year, bitcoin ATMs have
been rapidly popping up all over the province, and especially in
Montreal. The bitcoin ATM locator website http://coinatmradar.com/
currently reports 21 such ATM's in operation in the province
(18 in Montreal), compared with only one ATM operating in the
province at this time last year. These bitcoin ATM operators and
operators of other virtual currency trading platforms will now have
to meet the obligations under the money service business licensing
framework and should expect heightened oversight by the AMF.
Specifically, an application for a permit as a money service
business requires certain disclosure of information about the
business, including the legal and corporate structure, a business
plan, and information about any relevant employees and mandataries.
A money service business is also required to maintain and update
certain records and registers. Finally, licenses will only be
issued to businesses that the AMF deems, having considered input
from investigations by the Sûreté du Québec and
local municipal police forces, to possess integrity and good moral
character. The stakes for compliance are high: a money-service
business that contravenes the obligations or commits offences under
the Act could potentially be fined or have its licence revoked.
The AMF, despite the decision to oversee the operators of
virtual currency ATMs and online trading platforms, reminds
consumers in its news release that it has not regulated virtual
currency itself. In particular, the AMF notes that virtual currency
transactions remain not covered by financial services compensation
fund (protecting victims of fraud) or the deposit insurance fund
(guaranteeing the deposits of up to $100,000 per person in the case
of the insolvency of the deposit institution). As such, the AMF
warns of the continued volatility, liquidity and fraud risks
associated with virtual currency transactions.
The AMF's announcement comes in the wake of recent
amendments to the federal Proceeds of Crime (Money Laundering)
and Terrorist Financing Act, extending the scope of existing
federal anti-money laundering laws to persons "dealing in
virtual currencies", by including these within the definition
of "money services business". Regulations in respect of
these amendments detailing what type of activity will constitute
"dealing in virtual currencies" have not yet been issued,
and it will be interesting to see the extent to which they parallel
the approach taken by the AMF.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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