Bitcoin Legislation Potentially Disastrous for Growing Canadian Tech Sector
Concerns continue to mount in the cryptocurrency sector over the Harper Government’s approach to Bitcoin. Bill C-31 contains many potential implications to crypocurrency users, spread throughout various acts in dense legislation. While in spirit most of these developments were expected and not troubling for the international industry, the ambiguity of these rules has generated disastrous results for Canadian end users.
New rules could cause thousands of foreign registrations with FINTRAC
Under Bill C-31 and new money laundering rules, in order for a Canadian to sell any cryptocurrency to someone across borders, both parties could be required to register with FINTRAC as a money services business first. Not only will this most likely create a bottleneck of services at FINTRAC, it will discourage current and potential users from working with the Canadian sector.
Chris Salsman, President of The WhiteCoin Foundation, believes this could stifle Canada’s participation in a growing international industry.
“This is an eight billion dollar and growing business, and I fear we could see a migration offshore. Vault of Satoshi is a widely respected Ontario based bitcoin exchange, but why would any international user do business with them if they could be forced to jump through lengthy bureaucratic hoops? This demonstrates a completely backwards and dismissive approach to crypto by the Canadian Government. Vault of Satoshi is registered with FINTRAC and requires users to identify themselves fully to conduct transactions, and that should be enough.”
Canadian Bitcoin Related Bank Accounts Frozen
Dozens of Canadians have had their accounts frozen by nervous banks uncertain of what demonstrates a suspicious cryptocurrency transaction. Under these rules banks are not permitted to have relationships with ‘unregistered money service businesses’, which could potentially be interpreted as any Canadian who sells a cryptocoin and then tries to deposit the proceeds into a bank account without first being registered. There is total ambiguity as to if they will apply only to exchanges, or include bitcoin miners, buyers, or even just someone who accepts payment for service in bitcoin. Mr. Salsman understands why banks are concerned.
“Until there is clarification as to what a ‘dealer in virtual currencies’ is, banks are naturally responding this way out of fear of being found non-compliant, and the end result is many Canadians having their bank accounts unfairly frozen. ”
Bill C-31 Could Impede Canada’s entry to $8 billion & growing sector
Despite these difficulties in Canada, the bitcoin and cryptocurrency sector continue to grow. Mr. Salsman believes the real threat here is to the Canadian technology sector.
“I’ve met many industry innovators from across this country, all of whom believe cryptocurrency represents an amazing opportunity for a struggling Canadian tech sector. A Bitcoin or WhiteCoin is really just an encrypted proof of work chit, which means its potential applications go far beyond just payment transfer. A cryptocurrency technology based password protection service was recently launched; while this business would present no vehicle for money laundering, they too could be considered ‘dealers in virtual currencies’. Why would this industry choose Canada as a place to do business if that’s the case?”
Lack of consultation with industry breeds distrust
Despite the Federal Ministry of Finance claiming to be open for comment for months, there has been no understood outreach. This lack of communication with the industry and its users is troubling to say the least, but Mr. Salsman is hopeful it can still turn around. “Money laundering is a serious concern, and we’d be more than happy to work with Canadian Legislators to help create laws that address it while fostering the growth of this innovative sector.”
Great work!
