Digital Currencies

Background

Currently, digital currencies such as Bitcoin (BTC) and Litecoin (LTC) are not recognized as being “currency” by Canadian regulators. Canada’s 2014 Act to implement the federal budget (Bill C-31) will however change the status of “dealers” of digital currency. While the exact date has yet to be determined, it is likely that dealers in digital currency will be considered “money services businesses” (MSBs) within the next year.

While the industry in Canada is currently relatively unregulated from an AML perspective, businesses that deal or exchange digital currencies may struggle in finding banking relationships due to the sense within the financial services communities that transactions involving digital currencies are completely anonymous and not subject to the same rigorous controls as other industries.

We recommend that digital currency dealers and exchanges use the standards that apply to Money Services Businesses (MSBs) in Canada as the guidelines on which to base their AML programs and identification standards†.  In some cases, digital currency dealers and exchanges may be considered to be MSBs now (if they also carry on activities that would cause them to be captured in this category).

MSBs that operate in Canada are subject to Canadian anti money laundering (AML) and counter terrorist financing  (CTF) requirements.  The Canadian regulator is the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).  In addition to regulating the industry, FINTRAC receives reports from MSBs and publishes educational material for the industry.  MSBs that do business in Québec, are also regulated by the The Autorité des marchés financiers (AMF).  The AMF is the body mandated by the government of Québec to regulate the province’s financial markets.  While digital currency dealers and exchanges that are not considered MSBs would not be able to register with the regulators, other elements of AML compliance can be applied.

How Outlier Can Help

Outlier is designing plain language AML and CTF compliance program components to help you meet your obligations.  These documents walk you through what you need to do step by step.  You can purchase program components either separately or as a package.  You will need customize the documents by adding information about your business, and keep them up to date.

If you are comfortable editing the documents on your own, you can preview and buy everything that you need here.  If you would like the assistance of a consultant, we can assist you as well.  All of our consulting engagements are fixed-fee, so you will know exactly what the cost is before we start working.

If you have been contacted by FINTRAC and require immediate assistance, please take a look at our FINTRAC resources page or contact us.



† The author of this page is not a lawyer, and the recommendations made here should not be construed as legal advice.  If you require the advice of a lawyer that is familiar with digital currencies, we are happy to recommend someone to assist you.