As cryptocurrency gains a serious foothold in Canada, regulation is becoming a major talking point. The legislative environment is still evolving to deal with cryptocurrency, and the Canadian authorities have recently made moves to address the situation. Read on to learn which exchanges registered with FINTRAC and why.
New government rules mean that cryptocurrency exchanges in Canada will soon be forced to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). However, some cryptocurrency exchanges have already opted to voluntarily register with FINTRAC.
Nonetheless, movement on this matter is somewhat slow in Canada, with the authorities only having set out their official position just a couple of months ago. In the United States, it is possible to check online whether or not a particular cryptocurrency provider is registered with the American regulatory agency FinCEN, and the authorities ensure that a full list easily accessible. Unfortunately, FINTRAC doesn’t make things quite so convenient.
Nonetheless, we are able to confirm that the following exchanges and crypto businesses are fully registered with FINTRAC.
- Coinfield (Central Crypto Exchange Corp)
- Hibit Blockchain Inc.
There is still a lack of transparency in this area, at least in Canada. FINTRAC makes it possible to search for crypto exchanges by name, but many may be registered under a company name rather than via their branding. And even those companies which have registered with FINTRAC have not necessarily made this information prominent on their websites, as one would expect with traditional financial sector businesses. Hopefully, this will be rectified in the imminent future.
Calls for Regulation
This first tentative move into cryptocurrency legislation reflects public comments from the industry itself. As recently as May, representatives of various cryptocurrency companies in Canada called on the government to provide effective regulation of the digital industry. Calling on the authorities to update legislation, several cryptocurrency exchanges based in Canada chose to voluntarily register with FINTRAC. This includes Toronto-based cryptocurrency exchange Coinsquare, along with Montreal-based Shakepay.
FINTRAC is responsible for financial intelligence in Canada, with its mandate being to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities. Cryptocurrency has been particularly strongly associated with the former, pricking the interest of FINTRAC. Links with money laundering and terrorism have certainly not always been fair, but there is nonetheless a legitimate role for legislators in this area.
FINTRAC has recently introduced passed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) that requires cryptocurrency exchanges to register as MSBs (money services businesses). However, the amendments are currently classified as “Not in Force,” meaning that any exchanges that are currently registered as MSBs have done so voluntarily. MSBs are any companies involved in the transmission or conversion of money. The most obvious example of an MSB would be any currency exchange bureau.
It is perhaps strange that the authorities in Canada took so long to act over cryptocurrency, considering the awareness of the industry that is reflected in official reports. A 2015 Report from the Banking, Trade and Commerce Standing Committee noted that “the best strategy for dealing with cryptocurrencies is to monitor the situation as the technology evolves…[the] Canada Revenue Agency and Financial Transactions and Reports Analysis Centre of Canada must prepare to navigate and use blockchain technology”.
With the June announcement of the new MSB requirements, the Canadian government cemented the final stone in its cryptocurrency policy. Although this new legislation places responsibilities in the hands of exchanges, it also helps create a financial climate in which cryptocurrency exchanges are part of the mainstream financial architecture.
From a consumer perspective, there are clear advantages of dealing with an exchange that is FINTRAC registered. MSBs are governed by a series of stringent guidelines, including:
- Appointing a compliance officer responsible for the implementation and oversight of the compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
- Developing an extensive range of compliance policies.
- Reporting all suspicious transactions within 30 days to the appropriate authorities.
- Submitting a report to the Royal Canadian Mounted Police and the Canadian Security Intelligence Service when any terrorist activity is suspected.
- Submitting reports in relation to any transactions in excess of $10,000 CAD.
Stronger regulation for cryptocurrency exchanges operating in Canada is likely to provide a higher level of reassurance to consumers. And those exchanges which are quick to comply with the legislation will quite possibly gain a competitive advantage while offering consumers a more secure environment.
Canada is increasingly proud of its reputation as a global hub for cryptocurrency innovation. With Toronto being home to Vitalik Buterin – pioneer of the headline-grabbing Ethereum Blockchain – the North American nation is already at the heart of this rapidly evolving industry.
While the recent MSB decision is a popular one with many working in the cryptocurrency industry, it is of paramount importance that future governments employ a light touch with any further legislation. Canada can only retain its leading position in cryptos with diligent legislation. This is particularly critical at a time when the Canadian economy is demonstrating such healthy signs of growth; a welcome situation that cryptocurrency can play a significant role in helping to sustain.
Editors Note (25/09/18): This list has been updated to include several new businesses including Shakepay and NDAX that were found to be registered with FINTRAC as MSBs. We also removed several businesses that were not listed as MSBs on the official Government of Canada website.
Editors Note (27/09/18): The FINTRAC Advantages and FINTRAC rules section was updated with sources.
Editors Note (30/09/18): List of companies that are registered as MSBs was updated.