Another Bitcoin mining company, this time in Canada, is facing fines from government regulators.
The Dominion Bitcoin Mining Company of Saskatchewan has been under a cease-trade order since May of 2014. The order, issued by the Financial and Consumer Affairs Authority (FCAA) was originally filed because the FCAA accused the company of seeking investors without properly registering their intent. While the original order has since expired without penalty it seems that the FCAA is now upping the game by accusing Dominion of multiple violations of the Securities Act of 1988.
The new accusations range from the claim that company’s website contained statements that the three managing partners and only shareholders "knew or reasonably ought to have known were misleading or untrue" and that they were engaged in trading securities and not providing a prospectus for potential shareholders.
The hearing on these issues has been postponed until December 2, 2014 and despite several calls by Cointelegraph, the FCAA has declined to comment on the charges made against this company.
Dominion President Peter Voldeng said on Monday that apparently the FCAA has little understanding of exactly what Bitcoin was and how it worked. The FCAA’s jurisdiction covered securities and Bitcoin has never been deemed a security in Canada or anywhere else. He also said that the company would be “fully vindicated” at the hearing in December, explaining:
"Bitcoin isn't a security. If they say it's a security, they would be the first government in the world to give Bitcoin that sort of value or endorsement.”
Nathan Wosnack, COO at uBITquity, a Bitcoin advisory and development firm in British Columbia agreed with Voldeng. Wosnack said that while Canada had passed an anti-money laundering law, which was passed by Royal Assent to Bill C-31“An Act to Implement Certain Provisions of the Budget described as Tabled in Parliament on February 11, 2014 and other Measures (“Bill C-31”), an amendment to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (“PCMLTFA”) as legislation for anti-money laundering over financial transactions with digital currency.
This was approved by the Parliament of Canada on June 19, 2014, and became law governing digital currency financial transactions under the national anti-money laundering law. This law relates to FinTRAC (Canada's version of FINCEN) Anti Money Laundering, Know Your Client, and Politically Exposed Persons (PEP). This was not only Canada’s but the World's first national digital currency law and it has absolutely nothing to do with trading securities but rather deals with money laundering.
The above law was designed replace Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (PCMLTFA) and made five major changes. It is the second of these changes that is relevant in this case. Change number two specifically says that there is no current definition of what is considered “dealing in virtual currencies.” The new Act says in part that “it is not known what the defined term will encompass in terms of transactions but the government has clarified that it will apply only to digital currency exchanges.”
Dominion’s website was down yesterday and Voldeng said that they were in search of a new web hosting service and that the company planned to expand their scope to include ATMs and/or online wallets as well.
Jason Dearborn, Dominion’s Chairman of the company’s Board of Governors announced that, at least for the present, Dominion was not accepting any cash investments and was instead considering the possibility of trading Bitcoin instead because Bitcoin was outside of the FCAA regulations.
But this might also lead to problems according to," Dallas Smith, the FCAA Securities Division's legal counsel:
"Whether Canada or the banks or anyone else has assigned a value to the Bitcoin yet is neither here nor there. It is valuable consideration, obviously. They're exchanging shares for it.”
Unless Dominion has the worst of luck however, it seems that they might very well prevail at the December hearing according to Wosnack:
“But as far as I understand, this doesn't fall under IIROC (Investment Industry Regulatory Organization of Canada) rules, or under the Saskatchewan Securities Commission rules. Each province is regulated by their own independent Securities Commission. IIROC has made no rulings on trading Bitcoin since it wasn't sold as a security or investment vehicle. If Financial and Consumer Affairs Authority (FCAA) wins, this could be detrimental to any crypto currency companies in the province of Saskatchewan with the precedence it will set.”
Unfortunately, however, Wosnack might be more right than he knows. “Precedent” is often considered law even when it contradicts what the people’s elected officials decide and, on top of that, other countries often use those court decisions to fashion their own regulations and laws. This is most certainly a case to keep an eye on.
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