Regulation of virtual currencies in Canada

ELI Canada

Canadian governmental bodies are trying to respond to streams in capital market. Regulative authorities are no doubt aware of the importance of innovation and market integrity as Central Bank considers issuing digital currencies to support economic resonance.

Virtual Currency Regulation Review: Canada

As set in Section 8 of Currency Act, coins issued by the Royal Canadian Mint are officially tender. Nevertheless, Canada treats crypto-currency as a security and crypto-providers are treated as MSB. Crypto-currencies are covered by provincial laws, while regulative basis in state is substantially harmonized, despite some differences in regional laws.

As state applies similar measures to cryptoexchanges as other MSBs, they need to follow FINTRAC regulation of virtual currencies in Canada. Organizations acting with such currencies are regulated by Monetary means Laundering and Terrorism Financing Directive, with FINTRAC being the primary oversight body for deals carried out as MSBs. Digital assets providers are required to identify and verify clients for specific activities and operations, and maintain appropriate customer recordings.

As of June 2021, updated FINTRAC guidance regarding the Know Your Customer rules for MSBs, which must be drawn up in accordance with PCMLTFA, is effective. Guidance clarifies that wire operations, suspicious, large transfers in cash or large digital currencies, or operations suspected of links to terrorist organizations must be submitted to FINTRAC. More specifically, next-mentioned types of deals need to be notified:

  • CAD 10,000 (€6,960) or more in digital assets received within 24 hours;
  • 3000 Canadian dollars (2090 euros) or more in foreign transactions;
  • CAD 1,000 (€670) or more in digital means transfers, capital transfers, exchanges (incl. both crypto-to-crypto and fiat-to-crypto), digital assets sending to a recipient, and e-transactions;
  • regardless of amount, any operation seemed to be suspicious.

Digital means operators should be regularly reviewed by FINTRAC for compliance with regulative policies. Businesses should appoint officers and ensure internal AML/CFT procedures.

Canadian Securities Regulations for Crypto Businesses

Crypto-currencies are covered by securities norms and standards, within power of regulative basis of public protection in securities industry. Locally, securities norms are not enacted at the federal, but at the provincial levels. Provisions for entering this local market in all provinces and territories are largely unified. Securities Administrator is informal organization representing all securities regulative points in Canada.

This is presently most detailed guidance on realization of current ICO legislative provisions locally. Regulator has said it is aware of businesses vending their tokens as software products. Sale of tokens isn’t covered by securities provisions, but prudenced that in many points where entire scope of the offer or arrangement is considered, coins/tokens need to be treated as securities, including because they’re investment contracts.

Crypto-currencies might not be implemented as payment means. As in many states, in jurisdiction you can only pay in dollars. However, legislation allows direct exchange of goods – barter; it makes it possible to purchase goods for bitcoins. Thus, the legal circulation of bitcoins is limited only by a ban on making payments to government agencies and paying salaries to employees. Thus, Canada remains one of the leaders among adherents of the crypto-currency sphere.

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