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Canada: Anti-Money Laundering and Anti-Terrorist Financing Regulations for Virtual Currencies to Be Introduced

(Feb. 14, 2014) On February 11, 2014, the Canadian Finance Minister, Jim Flaherty, unveiled the Federal Budget for 2014, which included a brief mention of the plans of the Canadian government to introduce anti-money laundering and anti-terrorist financing regulations for virtual currencies such as Bitcoin. (Hon. James M. Flaherty, The Road to Balance: Creating Jobs and Opportunities [Tabled in the House of Commons], Government of Canada website(Feb. 11, 2014).)

Although the Budget acknowledges the strength and comprehensive nature of Canada’s anti-money laundering and anti-terrorist financing regime, it nevertheless notes that for that regime to remain effective “it is important to continually improve Canada’s regime to address emerging risks, including virtual currencies, such as Bitcoin, that threaten Canada’s international leadership in the fight against money laundering and terrorist financing.” (Id. at 133.) The regulations will be made pursuant to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act. (S.C. 2000 (as last amended Dec. 12, 2013), c. 17, JUSTICE LAWS.)

This announcement comes as information was released on an internal document of the Financial Transactions and Reports Analysis Centre of Canada, Canada’s financial intelligence unit, which was obtained through an Access to Information request. The document outlines “several ways to regulate and mitigate the risk of using bitcoin in Canada.” (David George-Cosh, Canada Regulators Look at Ways to Get a Better Handle on Bitcoin, The WALL STREET JOURNAL (Feb. 11, 2014).) Options listed include denying Canadians access to the virtual currency, forcing the currency underground, or considering “regulating bitcoin exchange houses to make sure they would provide the same financial crime reporting requirements as other exchanges.” (Id.)