Canada introduces new KYC/AML compliance laws that require cryptocurrencyexchanges to register with FinTRAC by June 2020.
Regulation of virtual assets such as cryptocurrencies is picking up pace in 2019 as governments and financial authorities impose new laws for the growing industry. Cryptocurrency exchanges in Canada will now be legally required to register with FinTRAC and collect their customers’ KYC details by next year June.
The announcement in the Canadian Gazette highlights the amendments made to regulations on proceeds of crime (money laundering) and terrorist funding. These new anti-money laundering (AML) laws aims to tighten up the Canadian financial system by regulating cryptocurrency exchanges in the country.
The report further states that these exchanges are expected to collect Know Your Customer information on the traders and wallet holders on their platform.
In a bid to end money laundering using cryptocurrencies and other virtual currencies, exchanges must report any suspicious transactions conducted on the platform to authorities. (FinTRAC: Financial Transactions and Reports Analysis Centre of Canada)
A Good Move for Crypto Exchanges?
The increased regulation measures come as a welcome sight to most of the Canadian investors following warnings by the Bank of Canada on cryptocurrency scams. The idea of using cryptocurrency assets on exchanges for terrorist funding and money laundering kept most banks from collaborating with the exchanges. The new laws may open up a gateway for partnerships between banks and these exchanges.
The compliance regulation has remained voluntary with a couple of cryptocurrency exchanges and OTC desks choosing to implement these KYC/AML requirements. However, this is not ideal for all players in the market as Lori Stein, a partner at business law firm Osler, Hoskin & Harcourt, says.
Lori acknowledges the benefits these exchanges are going to enjoy including the banking partnership that increases liquidity on the platform. He says,
“The hope is that now that there is going to be a requirement to register and comply, and oversight by FinTRAC, that banks and other financial entities are going to be more open to providing services to and dealing with virtual-currency businesses.”
Not So Good…for Us!
While the benefits are clear for the exchanges, some top crypto executives may not be willing to comply with the new requirements which may lead to the closure of some of the exchanges.
One particular critic of the mandatory requirements to crypto exchanges – CEO of blockchain startup Bitaccess, Moe Adham – expects the changes to push out more crypto firms outside the country.
“I expect to see a number of firms relocate outside of Canada, as well as international firms limiting access to Canadians.” – Moe Adham
Furthermore, Charlene Cieslik, CEO of Coinsquare, the largest Canadian exchange says the mandatory requirements will not only affect the exchanges but the market participants too. Most customers do not want to reveal their personal information to exchanges hence they’d rather move to other exchanges. He said,
“This has the potential to drive cryptocurrency underground again.”
Despite the new regulations, cryptocurrency and blockchain technology adoption growth is steady in Canada. We reported earlier in the month Coinsquare’s plans to upgrade millions of ATMs to sell Bitcoin with cash investments. Furthermore, the University of British Colombia is expected to launch blockchain programs for their Masters’ and PhD students.