In July 2019, final amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act") were released, which make extensive changes to Canada's AML regime. For a summary of these amendments, please refer to our previous bulletin " Final Amendments to AML Regulations Released".
The amendments include changes to the regulatory regime relating to virtual currency. Starting June 1, 2020, persons or entities dealing in virtual currencies will be considered money services businesses (MSBs). Dealing in virtual currencies includes virtual currency exchange services (e.g., exchanging funds for virtual currency, exchanging virtual currency for funds, or exchanging virtual currency for another virtual currency) as well as virtual currency transfer services (e.g., transferring virtual currency at the request of a client or receiving a transfer of virtual currency for remittance to a beneficiary).
"Virtual currency" is defined in the amended regulations as:
(a) a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
(b) a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).
Once the amendments come into force, persons or entities dealing in virtual currencies will need to comply with the obligations that apply to MSBs pursuant to the Act and the regulations thereunder. These obligations include registering the MSB with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) (which applies even if the MSB is registered provincially), having a comprehensive and effective compliance program, and complying with know your client and reporting requirements.
Although the requirement for persons or entities dealing in virtual currencies to be registered with FINTRAC will not be mandatory until the relevant amendments come into force on June 1, 2020, FINTRAC has announced that it is allowing MSBs dealing in virtual currencies to voluntarily register in advance of the amendments coming into force.
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