4th July 2018

Cryptocurrency Regulations in Canada

Cryptocurrency Regulations in Canada

Cryptocurrencies: Not legal tender

Cryptocurrency exchanges: Legal, required to register with FinTRAC after June 1, 2020

Cryptocurrencies are not legal tender in Canada but can be used to buy goods and services online or in stores that accept them. Canada has been fairly proactive in its treatment of digital, virtual, and crypto currencies: it was the first country to approve AML-related regulation of cryptocurrency service providers, primarily regulating them under provincial securities laws as money service businesses (MSBs) in order to protect the public. Canada brought entities dealing in virtual currencies under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) as early as 2014, while in 2017, the British Columbia Securities Commission registered the first cryptocurrency-only investment fund. In August 2017, the Canadian Securities Administrators (CSA) issued a notice on the applicability of existing securities laws to cryptocurrencies and, in January 2018, the head of Canada’s Central Bank characterized them “technically” as securities. The Canada Revenue Agency has taxed cryptocurrencies since 2013 and Canadian tax laws apply to cryptocurrency transactions.Exchanges in Canada are essentially regulated in the same way as money services businesses and are subject to the same due diligence, record keeping, verification, and reporting obligations as MSB’s dealing with fiat currencies. After amendments to the PCMLTFA (approved in July 2019), from June 2020 all cryptocurrency exchanges need to register with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) and, where applicable, comply with margin and market valuation requirements

In February 2020, the Virtual Currency Travel Rule came into effect in Canada, requiring all financial institutions and money services businesses (MSB) to keep a record of all cross-border cryptocurrency transactions (along with all electronic fund transfers). This change also effectively means that crypto asset deals, and persons that undertake cross-border transactions, are subject to the enhanced due diligence requirements set out in PCMLTFA.