Monday, June 23, 2014

Canada Signs First Ever Official Law Regulating Bitcoin

As CoinTelegraph put it, "The gloves are off for Bitcoin legality." 

There are some quite onerous regulations coming out of Canada, even for Bitcoin firms that are not based in Canada, but simply do business with Canadian citizens, but I expect U.S. regulations will be much more severe.

What the Canadian regulations do is make the entire above ground Bitcoin market extremely trackable. No bank or Bitcoin dealer will be able to deal anonymously with anyone. Bitcoin is NOT a libertarian tool.

Here's CoinTelegraph in the key points of the regulations:

“The five most important aspects of Bill C-31 as they relate to Bitcoin are as follows:
1. Regulates Bitcoin as MSB – Bitcoin dealing, more specifically referred to as “dealing in virtual currencies” in Bill C-31, will be subject to the record keeping, verification procedures, suspicious transaction reporting and registration requirements under the PCMLTFA as a money services business.
2. Does not define “dealing in virtual currencies” - The phrase “dealing in virtual currencies” was left undefined and it is not known what the defined term will encompass in terms of business activities once defined by regulation.
3. Registration with FINTRAC - Bitcoin dealers will be required to register with FINTRAC and if successfully registered, to implement a complete anti-money laundering compliance regime.
4. Captures foreign Bitcoin companies targeting Canada – Bill C-31 is more sweeping than other Canadian laws because it extends to: (a) companies that have a place of business in Canada; and (b) companies that have a place of business outside Canada but who direct services at persons or entities in Canada. Coinbase, for example, will have to register with FINTRAC to continue to provide Bitcoin services in Canada. Having a place of business means physically located in Canada, or having an R&R in Canada. Bitcoin businesses in Canada, however, that provide services to persons or entities outside of Canada are exempt from Bill C-31 for those external services.
5. Prohibits banks from opening accounts for Bitcoin entities if unregistered - Under Bill C-31, banks will be prohibited from opening and maintaining correspondent banking relationships with Bitcoin dealers that are not registered with FINTRAC. This is an extremely important aspect of Bill C-31 and Bitcoin businesses should ensure they understand what a correspondent banking relationship is and how it can affect the provisions of banking services to them internationally.”

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