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Compliance Issues Plague Canadian Cryptocurrency Industry

Canada’s cryptocurrency industry has been facing increased scrutiny from regulators as the country continues to grapple with compliance issues surrounding the use of digital currencies.

A Significant Milestone and Compliance Concerns

In a significant milestone, Canada approved its first Bitcoin Exchange Traded Fund (ETF) earlier this year, paving the way for similar products in the market. However, this development has also highlighted the need for businesses dealing with cryptocurrencies to navigate complex regulatory frameworks.

Under Canadian securities laws, cryptocurrencies are classified as commodities rather than “money,” and as such, exchanges or “tokens” are required to comply with securities regulations. Additionally, cryptocurrency entities are bound by strict anti-money laundering (AML) regulations, making them considered money services businesses.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the country’s financial intelligence unit responsible for implementing AML regulations. Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), Reporting Entities, including Money Services Businesses (MSBs), are required to comply with various AML/anti-terrorist financing regulations.

  • Cryptocurrency entities that deal in virtual currencies must register with FINTRAC before operating in Canada.
  • They must also establish a comprehensive compliance program, conduct ongoing training, and maintain accurate records.

Regulatory Framework in Canada

Canada’s regulatory framework for MSBs is relatively straightforward compared to the United States. Entities dealing with cryptocurrencies in Canada are required to comply with federal AML regulations, whereas those operating in the US must register with the Financial Crimes Enforcement Network (FinCEN) and obtain money transmitter licenses at the state level.

Compliance Capabilities for Cryptocurrency Entities

Given the increasing regulatory demands and potential penalties for non-compliance, it is essential for cryptocurrency entities to work with experienced compliance professionals. Sia Partners offers a team of former regulators with extensive experience in interpreting and implementing regulations, helping businesses manage and mitigate compliance risks.

In this rapidly evolving landscape, it is crucial for cryptocurrency entities to prioritize compliance to avoid penalties and maintain a strong reputation in the market.