In its bid of fighting money laundering and terrorism financing, Canada through its Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) will enact new laws from 1st June 2020. Once 1st June 2020 reaches, crypto firms operating in Canada will have to acquire a license from FinTRAC to operate within its borders.
While Canada has been a conducive market for crypto firms to start and flourish, the new standards from the FATF seem to be calling for stringent measures to be put in place. Apart from that, the loss brought forth by QuadrigaCX was a wakeup call to FinTRAC. However, the laws were in place before this amendment come in place. The only difference is getting the license wasn’t mandatory and as such many of the crypto exchanges didn’t see the need to get the permit from FinTRAC.
In addition to complying with the registration requirements, the exchanges also have to follow strict know your customer (KYC) policies.
From 1st June 2020, crypto exchanges will also have to inform any suspicious transactions to FinTRAC. Similarly, per the circular, exchanges have to keep records of transactions amounting to more than $10,000 either from an individual or entity. Additionally, crypto exchanges will also be required to employ or appoint a compliance officer.
Mandatory Requirement is a Doubled-Edged Sword
Although strengthening of laws in place is a good thing, it might also affect the crypto sector severely. While the watchdog together with the government will be preventing money laundering and terrorism financing, the move might lead to some crypto exchanges walking out of the Canadian market. According to Bitaccess CEO Moe Adham, several firms might relocate to other markets while those that remain in operation might lock out Canadian traders.
On the other hand, Coinsquare came out saying;
“While Canada has been viewed as Disney land for crypto firms, enactment of the laws will ruin its image and also make traders shy away from processing their transactions via crypto exchanges in Canada.”
Traders who don’t want to disclose their information to crypto exchanges will turn to trade directly with other traders. Although the law will come into effect in 2020, the Canadian crypto market is already an uncertain state. Exchanges don’t know how the market will be affected. However, the Canadian government is hoping the law will help bring onboard financial institutions to work with crypto exchanges.