Cryptocurrency exchanges in Canada will be legally required to register with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) as of June 1, 2020, according to a notice published on July 10.
This requirement will come into effect along with other amendments to Canada’s new Anti-Money Laundering (AML) laws next year.
Crypto exchanges will also reportedly be required to observe Know Your Customer policies and report any suspicious transactions to the Canadian watchdog; this also includes keeping records of their clients and hiring a compliance officer for their platform.
A report by The Globe and Mail notes that up until now, compliance with these policies has been voluntary, but some exchanges have chosen to do so anyway.
The motivation for implementing the new policies is reportedly to get Canadian banks onboard and in cooperation with cryptocurrency exchanges.
According to Lori Stein, a partner at business law firm Osler, Hoskin & Harcourt, Canadian financial institutions have historically been concerned about the risk of money laundering and terrorist financing via crypto exchanges. Stein said:
“The hope is that now that there is going to be a requirement to register and comply, and oversight by FinTRAC, that banks and other financial entities are going to be more open to providing services to and dealing with virtual-currency businesses.”
However, Stein points out that some international exchanges may not be willing to comply with the new Canadian rules. Some other experts reportedly agree, saying that having mandatory regulation requirements could result in cryptocurrency exchanges opting to exit from the Canadian marketplace.
The CEO of blockchain startup Bitaccess, Moe Adham, told The Globe and Mail, “I expect to see a number of firms relocate outside of Canada, as well as international firms limiting access to Canadians.”
The new regulatory policies may also drive crypto exchange customers away, some say. “This has the potential to drive cryptocurrency underground again," said Canadian crypto exchange Coinsquare’s AML officer, Charlene Cieslik. Cieslik said that customers who do not want to reveal their information to exchanges, would likely just transact with each other directly.