Pursuant to Québec's Money-Services Businesses
Act (the "Act"), businesses that
provide money services for remuneration, which includes the
operation of an automated teller machine
("ATM"), must hold a licence issued by
the Autorité des marchésfinanciers
(the "AMF"). On February 12, 2015, the
AMF announced that it had amended the Policy Statement to the Act
to bring virtual currency ATMs (such as Bitcoin ATMs) and virtual
currency trading platforms within the purview of the Act. As a
result, businesses that operate a virtual currency ATM or a virtual
currency trading platform will now be required to obtain a licence
from the AMF and comply with the provisions of the Act.
Money-Services Businesses Act
Under the Act, which came into force on April 1, 2012, any
person who operates a money-services business for remuneration must
comply with licensing, verification, reporting and other
obligations under the Act. The Act lists various services which are
considered to be "money services". Included in that list
is the operation of ATMs.
The Policy Statement to the Act explains that the operation of
an ATM consists in "making available to the public a means of
withdrawing cash funds from a machine without the intervention of a
natural person." The recent amendments to the Policy Statement
have 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, also constitutes the
operation of automated teller machines". As a result, the
operation of a virtual currency ATM or a virtual currency trading
platform is an activity that now falls within the scope of the
licensing and other requirements of the Act.
The sanctions for non-compliance with the Act and the
Regulation under the Money-Services Businesses Act (the
"Regulation") can be severe. Certain transgressions, such
as failing to provide information or documentation required under
the Act, carry fines of up to $200,000. For second or subsequent
offences, the minimum and maximum fines prescribed in the Act are
Finally, it is worth noting that businesses licensed to operate
ATMs are exempt from the customer identity verification
requirements provided for in sections 7 to 11 of the Regulation in
respect of activities which fall under the "ATM" class of
Risks Associated with Virtual Currency
In its announcement on February 12, the AMF also warned of
certain risks associated with virtual currency. In particular, the
AMF noted that it does not regulate virtual currencies, and that
such currencies can present volatility and liquidity risks. It also
warned that the AMF's financial services compensation fund and
its deposit insurance fund do not cover transactions involving
virtual currency. Finally, the AMF pointed out that virtual
currency can be a vehicle for Ponzi and other fraudulent schemes
due to its anonymous nature.
Bitcoin ATMs in Canada and Québec
According to the website Coin ATM Radar (http://coinatmradar.com), which tracks the
number and location of Bitcoin ATMs all over the world, there are
currently 61 Bitcoin ATMs installed in Canada. Canada is
second only to the United States, which leads the way with 120
Bitcoin ATMs. The United Kingdom is in third place with 21.
Québec has experienced a surge in the number of Bitcoin
ATMs in the past year. In February of 2014, Québec's
first Bitcoin ATM was installed at the Bitcoin Embassy in Montreal.
Just over a year later, the province now has 19 Bitcoin ATMs.
Federal Regulation of Virtual Currencies
Virtual currencies have also attracted the attention of the
Canadian government. For instance, the 2014 Federal Budget made
specific mention of the need to introduce anti-money laundering and
anti-terrorist financing regulations for virtual currencies such as
Bitcoin. Certain amendments to the Proceeds of Crime (Money
Laundering)and Terrorist Financing Act have been
proposed but are not yet in force. These amendments would, among
other things, make certain persons that deal in virtual currencies
subject to Part I of the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act, which includes record keeping,
identity verification, reporting and other requirements. The
amendments would also prevent banks and other entities from opening
or maintaining an account for, or having a correspondent banking
relationship with, certain persons that deal in virtual currencies,
unless those persons are registered with the Financial Transactions
and Reports Analysis Centre of Canada (FINTRAC). Regulations under
the Proceeds of Crime (Money Laundering) and TerroristFinancing Act which address virtual currencies have not
yet been issued, but are eagerly awaited.
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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