Canada has imposed a sweeping regulation that will require cryptocurrency exchanges to be in compliance with a local watchdog regulator by June 2020.
Canadian Crypto Exchanges
According to a report published on July 10, crypto exchanges operating in Canada will be forced to register with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) by June 2020.
The amendment on cryptocurrency exchange regulations is apart of a broader set of laws by the Canadian government to crack down on money laundering.
Canada is looking to impose the growing trend of Know Your Customer (KYC) regulations on cryptocurrency exchanges, which require the organizations to collect pertinent information on clients. Given the propensity for money laundering and drug trafficking through crypto exchanges, Canada is hoping to curve the use of decentralized currencies for illicit behavior through greater law enforcement.
Will crypto exchanges comply with @FINTRAC_Canada rules that they must register with the financial watchdog or will some exit the marketplace all together? The hope for these policies is to get banks in cooperation with exchanges and only time will tellhttps://t.co/vKQ0vjGHHr
— Solidus Labs (@Solidus_Labs) July 11, 2019
In addition to supplying information on customers, crypto exchanges operating in Canada will be required to report suspicious behavior to FinTRAC and keep detailed records of transactions.
While the movement appears from the outside as a crackdown by Canadian authorities, it is reportedly motivated out of an attempt to spur banks into taking greater interest in cryptoassets.
Money Laundering Concerns
Lori Stein, a partner at business law firm Osler, Hosking & Harcourt, said that Canada has long been concerned with the risk of cryptocurrency being used for money laundering and funding terrorist organizations.
“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.”
Stein anticipates that increased regulations will lead to the exclusion of certain global cryptocurrency exchanges. However, the Canadian marketplace will have to bear the burden of lost crypto transactions in order to maintain adequate oversight.
More concerning for the crypto ecosystem is the anticipated loss of cryptocurrency users. While Canada’s new policies will enforce tighter regulations on exchanges, it also has the effect of ostracizing clients interested in anonymity and truly decentralized platforms.
As crypto continues to gain prominence globally, governments will be forced to balance the desire for regulatory supervision without impeding digital currency innovation.