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Since 2014, entities dealing in virtual currencies have been subject to Anti-Money Laundering Regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). 

The Financial Transactions and Report Analysis Center of Canada (FINTRAC) defines a virtual currency as “a digital representation of value that can be used for payment, investment or retail activities, such as buying and selling goods and services.”

Scope of the Travel Rule

All financial entities (FEs), money services businesses (MSBs), foreign MSBs (FMSBs), which include entities "dealing in virtual currency" which are defined by the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as:

"Virtual currency exchange services include exchanging:

  • funds for virtual currency,

  • virtual currency for funds, or

  • virtual currency for another virtual currency.

Virtual currency transfer services include:

  • transferring virtual currency at the request of a client, or

  • receiving a transfer of virtual currency for remittance to a beneficiary".

It also applies to electronic funds transfer (EFT) or virtual currency (VC) transfers.

Supervisory body

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

Threshold

CAD 1000

Information to be exchanged:

  • the name, address and the account number or other reference number (if any) of the person or entity who requested the transfer (originator information); and

  • the name, address and the account number or other reference number (if any) of the beneficiary.

At the time of writing, there was no mention of unhosted wallets. 

When do you need to comply?

1 June 2021. However, FINTRAC will only start the compliance assessment with those regulations from 1 April 2022.

What else do you need to know?

In Canada, each province and territory has its own rules and securities regulators.  Moreover, in Canada, VASPs are more commonly referred to as crypto-asset trading platforms (CTPs).

As of 1 June 2020, entities engaged in virtual currencies are considered MSBs and must register with FINTRAC.

Not only do anti-money laundering (AML) Regulations apply to virtual asset service providers (VASPs), but also, in most cases, securities regulations may apply to VASPs who might need to get licensed. 

The Canadian Securities Administrators (CSA) is an umbrella organisation of Canada's provincial and territorial securities regulators. It has published guidance in the form of several "staff notices" concerning virtual currencies to address the rapidly evolving developments related to virtual currencies. It has been confirmed that crypto exchanges do need to be registered with a securities regulator as they deal with "crypto contracts."

Reporting obligations: when receiving virtual currency in an amount equivalent to $10,000 or more in a single transaction, VASPs must submit a large virtual currency transactions report to FINTRAC.

 

Applicable regulation

Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) 

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Guidance on Travel Rule for electronic funds and virtual currency transfers

Guidance on Reporting Large Virtual Currency Transactions

Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Staff Notice 21-329 Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirement

Written by:
Delphine Forma
Delphine Forma
Senior Compliance Manager at BitMEX

Delphine Forma is an experienced compliance officer who worked across different industries including Bank of Tokyo, Mitsubishi UFJ, HSBC Bank, and crypto businesses (exchanges and miners). She holds a diploma from Sciences Po Lyon, and two masters specialising in European Criminal Business Law and Frauds and Money Laundering Prevention. Delphine is a board member of the OpenVASP Association.

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