New Canadian rules around AML/ATF and offering of tokens

It’s a big week for Canadians whom work in cryptocurrency. First, the Department of Finance released an impact analysis statement around the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Canada Gazette, Part I, Volume 152, Number 23: Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2018

Most notably the proposal:

  • Persons and entities that are “dealing in virtual currency” would be financial entities or other entities deemed domestic or foreign MSBs, as the case may be. These “dealing in” activities include virtual currency exchange services and value transfer services. As required of all MSBs, persons and entities dealing in virtual currencies would need to implement a full compliance program and register with FINTRAC. In addition, all reporting entities that receive $10,000 or more in virtual currency (e.g. deposits, any form of payment) would have record-keeping and reporting obligations.

These amendments serve 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. For this reason, the amendments are targeted at persons or entities engaged in the business of dealing in virtual currencies, and not virtual currencies themselves.

and a couple of days later, the Canadian Securities Administrators sent out a notice on Securities Law Implications for Offerings of Tokens.

CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens [PDF]

Most notable it provides guidance on when an offering of tokens may or may not involve an offering of securities, and has many examples. They also recommend you work with qualified securities legal counsel as well as the regulatory bodies themselves.