law and technology and rock and roll

recent | past | about | rss

Budget 2014 Suggests Canada Might Regulate Bitcoin

Posted by Matt on February 12, 2014         Tagged with: bitcoins

Just under two weeks ago, Forbes' Kashmir Hill published a piece on the legality of Bitcoins around the world. It had the following to say about Canada:

Canada: The Great White North famously welcomed the first Bitcoin ATM last year, in part because those who own it don’t have to worry about complicated laws around Bitcoin. Canada doesn’t consider Bitcoin to be legal tender, and is as interested in regulating it as it is Monopoly money… at least for now. People using it for transactions need to pay tax as they would for bartering or speculative purchases. Unlike in the U.S., Canada’s financial regulator doesn’t regard Bitcoin exchanges as money services businesses, meaning they don’t need to register with it or flag suspicious transactions.

We should have known it couldn't last.

This week the Government of Canada released it's 2014 budget, titling it The Road to Balance: Creating Jobs and Opportunities. Check out what's in Chapter 3.2, under the heading Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime (emphasis mine):

The Government of Canada is committed to a strong and comprehensive regime that is at the forefront of the global fight against money laundering and terrorist financing and that safeguards the integrity of Canada’s financial system and the safety and security of Canadians. Canada’s regime remains strong and effective and is consistent with international standards. However, it is important to continually improve Canada’s regime to address emerging risks, including virtual currencies, such as Bitcoin, that threaten Canada’s international leadership in the fight against money laundering and terrorist financing.

To this end, the Standing Senate Committee on Banking, Trade and Commerce undertook a five-year review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and issued its final report in March 2013. Concurrently, the Government consulted with stakeholders to solicit their views on specific proposals and identify additional measures for consideration.

Pursuant to this review, the Government will introduce legislative amendments and regulations to strengthen Canada’s anti-money laundering and anti-terrorist financing regime and improve Canada’s compliance with international standards, while minimizing the compliance burden.

For example, the Government proposes to:

  • Introduce anti-money laundering and anti-terrorist financing regulations for virtual currencies, such as Bitcoin.
  • Make online casinos subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
  • Enhance the ability of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to disclose to federal partners threats to the security of Canada, consistent with the Government’s response to the Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182.

To implement these amendments, the Government proposes to provide FINTRAC up to $10.5 million over five years and up to $2.2 million per year ongoing. The Government also proposes to provide up to $12 million on a cash basis over five years to improve FINTRAC’s analytics system. This investment will increase efficiency, improve data quality and better meet the needs of Canadian law enforcement and other regime partners.

FINTRAC is the Financial Transactions and Reports Analysis Centre of Canada, a government agency whose mandate is to "is to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities". No specific details are provided as to how the government might try to regulate virtual currencies, but it certainly sounds like Canada's time as the wild west of virtual currencies may soon be over.

(Hat tip to this Globe & Mail article for bringing this to my attention.)