House Finance Committee Urges Canadian Government to Regulate Cryptocurrencies

After holding a series of 18 meetings to review Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the House Finance Committee has recommended that the Government of Canada regulate cryptocurrency businesses to prevent criminal use, iPolitics reports.

The committee has been conducting meetings to review PCMLTFA laws since February, something required of at least one parliamentary committee every five years.

The committee has heard from over 70 expert witnesses since it started the review last February, including representatives from the financial advisory firm IJW & Co. and the law firm Durand Morisseau LLP, both of which submitted 65-page reports.

In its report to the government, the committee said that both firms warned:

“(I)n the absence of some degree of regulatory oversight, cryptocurrency transactions may be used by parties to swiftly move large amounts of wealth across borders.”

The committee said that its three recommendations to parliament accorded with those suggested by the firms:

  1. Cryptocurrency exchanges handling crypto-to-fiat conversions must be legally classed as money services businesses (MSBs), which are required to follow strict financial-reporting guidelines, “…in compliance with the PCMLTFA.”
  2. Cryptocurrency exchanges should be licensed as they are in New York (Bitlicense).
  3. Digital cryptocurrency wallets should also be regulated, “so suspicious purchases can be traced more easily and police can track hacking or financial crime.”

Crypto-to-fiat gateways have previously been identified by American law enforcement personnel as choke points because crypto is so far rarely accepted at the retail level and must be converted to real-world currencies at some point.

With regards to licensing, early crypto exchanges like Kraken have fiercely criticized the New York Bitlicense program, calling it so onerous as to be anti-competitive and protective of the state’s mainstream and established financial services sector.

Under the Bitlicense program, an exchange domiciled in the state of New York must obtain a specific individual license. This involves fees and procedures and time lags in each.

Kraken and Coinbase both relocated to San Francisco, although the Winklevoss brothers, who own the Gemini exchange, opted to stay in New York and tough out the atmosphere in the hopes of one day becoming the institutional crypto-trading platform of choice in America’s financial capital.

Noteworthy crypto-wallet news in North America includes recent reports that Eric Voorhees, creator of the Shapeshift wallet, recently announced his formerly anonymous wallet service for crypto-to-crypto conversions (at a fee) would be requiring all users from now on to provide government ID.

Contrary to popular opinion, cryptocurrency networks like Bitcoin are not anonymous though conducting digital forensics on them can be an expensive affair.

Underworld and very privacy-conscious figures have also used Bitcoin “tumbling” and “mixing” services to obscure the origins of their transmissions.

Others have been using privacy-focussed cryptocurrencies like ZCash and Monero. Both networks, however, have been periodically accused of privacy lapses because of technical issues.

According to iPolitics, “…the government is required to table a response to the committee’s recommendations in the House of Commons within 120 days.”

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