The cryptocurrency industry is fast growing to a sector that global authorities can no longer ignore, or do so at their detriment.
It may be fair to say that Canada has learned that lesson in a ‘not-so-hard’ way that should interest any other country that has until now not recognized as ‘legal’ the activities of cryptocurrency exchanges.
These trading venues for cryptocurrencies process millions of transactions daily and hold customer funds amounting to similar numbers.
But until the demise of QuadrigaCX earlier this year, Canada was among those countries that never made a legal framework for cryptocurrency exchanges, allowing them to operate without official recognition.
When QuadrigaCX owner, Gerald Colten passed away without allegedly handing anyone access to the exchange’s cryptocurrency wallets, roughly $190 million worth of user crypto assets went missing with little to no chance of getting them back.
The ugly development made headlines across both mainstream and cryptocurrency news outlets and cast into the public domain, the fact that such a multi-million industry existed in Canada without sufficient regulatory oversight.
It was in the midst of that chaos that Stmarket.co reported for the first time that Canadian regulators were working on a framework to regulate the activities of cryptocurrency exchanges.
With that more comprehensive framework still in works, the Canada government has taken a first step towards bringing these businesses under their oversight.
On Wednesday, the country published in the Canada Gazette amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act which formerly catered for only players in the traditional finance field.
To be fair, these amendments which made sufficient room for cryptocurrency exchanges first appeared in June 2014 but remained under regulatory purview until now.
Following its passage, the country now classifies both foreign and local crypto exchanges and wallet operators serving the Canadian audience as money servicing businesses (MSBs). These firms are mandated to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Additionally, they would have to report to FINTRAC cryptocurrency transactions above CA$10,000 (appr. $7,667), identifying the sender and other details stipulated by the FINTRAC framework.
The reason for these provisions according to the Canadian government is to “mitigate the money laundering and terrorist activity financing vulnerabilities of virtual currency in a way that is consistent with the existing legal framework, while not unduly hindering innovation.”
Operators have between now and next June to comply with the new rules.
Although the new requirements from cryptocurrency platforms do not solve the root problems of the QuadrigaCX saga, it marks one of the first Canadian laws to make a provision for these kinds of businesses.
Yes. It may have taken five years to arrive, but it is a reminder to other regions who still ignore the existence of cryptocurrency-related businesses in their respective regions.
Would there be other QuadrigaCX situation? Hopefully not, but it would be best to fix the leaking roof before the rainy day.