In the Budget speech last February, the Minister of Finance announced that the Government would introduce anti-money laundering and anti-terrorist financing regulations for virtual currencies such as Bitcoin.  On June 19, 2014, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Act) was amended to bring persons that “deal in virtual currencies” under the Act.  What it means to “deal in” a virtual currency and, importantly, what is a “virtual currency” are to be determined by regulation.  There is still no word from either the Minister of Finance, who oversees the legislation, or the Financial Transactions and Reports Intelligence Analysis Center of Canada (FINTRAC) on the timing for the development of those Regulations.

The amendment places dealers in virtual currencies in the same category as money services businesses.  The clear implication is that the Government intends to regulate the exchanges that allow customers to convert paper currency into a virtual currency and vice versa.  When the Regulations are made virtual currency dealers will be required to register under the Act and to maintain anti-money laundering and terrorist financing programs.  Presumably, they will also have to report suspicious transactions to FINTRAC.

The amendment applies to both Canadian domestic dealers in virtual currencies as well as those that do not have a place of business in Canada, but direct their services at persons or entities in Canada, and provide those services to them.  By extending the Act to dealers that operate from outside of Canada, the Government is clearly acknowledging that given the nature of a virtual currency, it is difficult to adequately regulate if only entities that have a physical presence in Canada are caught by the Act.