Canada Tightens Crypto Regulations Alongside AML/CTF Overhaul

canada crypto exchange

The Financial Transactions and Reports Analysis Center of Canada (FINTRAC) recently made an important announcement. They revealed that they were looking to implement new anti-money laundering and counter-terrorist financing regulations to cryptocurrency. This also means that the crypto industry in Canada will get updated guidelines from the regulators, including Canadian cryptocurrency exchanges.

This might serve as a very important step going forward. The next bull phase in the crypto market is poised to bring in more people than ever. To make sure that crypto businesses and users stay within legal boundaries, regulations need to be enhanced. This is important for any new industry to prosper. Given the role of crypto in the future financial system, this is a no-brainer.

Read more:A glimpse at the Global Cryptocurrency regulation

Evolution of Regulations

Crypto Regulation

Cryptocurrencies have been mired with controversies ever since their inception. When Bitcoin first came around, the idea of a decentralized currency seemed too “out there”. The reason was that it was not going to be controlled by any central authority. The existing monetary/payment system all have controlling authorities in the world. That ensures stability as well as consumer protection. However, bitcoin was going to change that notion.

Therefore, it and other cryptocurrencies (altcoins) have always been surrounded by a lot of controversies. The promise of groundbreaking technologies, however, convinced regulators to not ban them. Although, their major concerns still remained. The major risks of crypto are money-laundering, terrorist financing and tax evasion. All of these are activities that any regulator in the world takes seriously.

Slowly but surely, regulators came up with crypto-specific regulations. Their main concerns of money-laundering and terrorism were finally addressed. In fact, Canada was the first country in the world to make any laws about crypto whatsoever. Crypto is still a developing industry though. As such, the law needs to keep up. And that’s exactly what the Canadian regulators have done. In a report that was published on March 10, FINTRAC has stated the need for enhanced AML/CTF regulations.

Offshore Countries To Get Expanded Mandate

FINTRAC’s report goes into detail about revolutionary technologies like crypto. They state that many new technologies can have incremental risks. However, it is important to keep in mind that they can also be quite revolutionary. History stands proof to the fact that disruptive technologies have changed the world for the better.

FINTRAC is quite right in its assessment. Therefore, it is more important than ever to have a legislative framework for such technologies. This ensures that their benefits are leveraged while keeping the risks at bay at the same time. To achieve this, the updated framework will require new reporting standards for cryptocurrency transactions. This will also expand its mandate to off-shore crypto companies, including foreign cryptocurrency exchanges. This could really be important given the global nature of cryptocurrency.

The regulatory body doesn’t want to make its own decisions though. Therefore, it has stated that it wants to undertake a substantial national consultation. This would be done with industry stakeholders for greater insight. Once that is done, they will begin the rollout of the new guidelines. This will also ensure that things happen smoothly. FINTRAC has also stated that it is open to changes or adjustments to the new guidelines. This kind of flexibility is quite important when it comes to new technology like crypto.

New Reporting Requirements

FINTRAC and Cryptocurrency Exchanges

Different regulators of the world are increasingly tightening their grip over reporting requirements. Since there is an element of anonymity with crypto, this ensures they know as much as possible about bitcoin transactions. FINTRAC wants to enhance these reporting requirements too.

Any business dealing in crypto, Bitcoin ATM, cryptocurrency exchanges, bitcoin hedge fund etc, will have to keep detailed accounts of crypto transactions. This includes their own transactions and the transactions of all the clients using their services. The requirements don’t just end at keeping records. These businesses will also need to report these transactions to the regulators. This is similar to how regulators have access to banking records of individuals if they require it.

But the crypto businesses won’t need to report every single transaction. According to FINTRAC, only transactions that are worth more than 1,000 Canadian dollars need to be recorded. They will also need to record the type and amount of each cryptocurrency, the sending and receiving addresses, the source of the crypto as well as the entities involved in the transaction. This is a comprehensive amount of data about every single transaction that occurs. If the value exceeds 10,000 CAD, it needs to be reported to FINTRAC.

Adhering To FATF Guidelines

FATF (Financial Action Task Force) is an international, intergovernmental financial watchdog, have some really important responsibilities.

• FATF track global money laundering and terrorist financing activities. They help authorities track down criminals dealing in weapons, illegal drugs, human trafficking and other criminal activities.
• FATF has issued some guidelines that are meant to be followed by every country. This would ensure a more or less uniform regulatory regime throughout the world. Which, in turn, ensure that crypto transactions become easier to track.

FINTRAC’s recent regulatory overhaul for crypto maybe because of the FATF guidelines that are going to come into force soon. In fact, in 2016, FATF had stated that Canada’s crypto industry was among the country’s most vulnerable sectors to AML/CFT violations.

That is a serious assessment and FINTRAC has taken it very seriously. Therefore, it is responding with an overhaul of the AML/CFT regulations. This should greatly enhance Canada’s crypto industry status in the eyes of FATF.

A similar approach needs to be taken by other countries in the world too. There is still a lot of time before the next wave of adopters come in. Before then, the laws should be airtight. They should allow for innovation to prosper and yet should curb any adverse impacts.

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