Canada Needs Crypto Regulation to Prevent Money Laundering, Lawmakers Say
The House Financial Committee has proposed several measures, including oversight of virtual currency exchanges and wallets.
Canada’s federal lawmakers have urged the government to introduce cryptocurrency regulation so that virtual coins cannot be used by criminals to cover illegal activities, local media outlet iPolitics reported on Wednesday. The members of the House of Commons Standing Committee on Finance (FINA) proposed three measures that should introduce anti-money laundering (AML) regulation for digital asset trading venues and wallet providers.
The MPs want Canada to register crypto-to-fiat exchanges as money service businesses (MSB). This recommendation aligns with the government’s draft proposal from June to put virtual currency trading operators under the scope of the Financial Transactions and Reports Analysis Centre (FINTRAC) as MSBs. FINTRAC is a federal agency for AML and counter-terrorist financing oversight, similar to the US Financial Crimes Enforcement Network (FinCEN). However, in August, Canada’s government delayed moving the draft forward until federal elections in late 2019.
Lawmakers also propose the creation of a licensing regime similar to that of New York State, whose BitLicense covers financial regulatory issues and is independent of FinCEN rules. However, FINA members did not explain whether that regime should be implemented on a federal level by one common regulator or on a local basis, by the ten provinces and three territories of Canada.
MPs also recommend that wallet providers implement due diligence procedures so that exchange operators and law enforcement agencies have access to the real ownership of wallets whenever needed.
“Law enforcement bodies must be able to properly identify and track illegal crypto-wallet hacking and failures to report capital gains,” the proposal reads.
FINA’s recommendations are part of the ongoing review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Various crypto companies and stakeholders have sent their opinion to the lawmakers.
According to the Blockchain Association of Canada, state authorities should work together with crypto exchanges in the detection of criminal activities, not take unilateral action. Financial adviser IJW & Co and law firm Durand Morisseau both back AML rules for digital coins market because “in the absence of some degree of regulatory oversight, cryptocurrency transactions may be used by parties to swiftly move large amounts of wealth across borders.”