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Canadian New AML Law Will Force Crypto Exchanges to Register with FinTRAC

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Canadian New AML Law Will Force Crypto Exchanges to Register with FinTRAC
Canadian New AML Law Will Force Crypto Exchanges to Register with FinTRAC

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As online cryptocurrency trading continues to grow rapidly in countries around the world, many are still struggling to come up with proper cryptocurrency regulations. The US is in the spotlight, with the entire world watching the SEC and waiting for their decisions. Meanwhile, other countries are doing their best to try and come up with proper laws that would not damage the sector, but still protect investors from scams, illegal activities, or improper assets.

Canada is a good example of this, with the country preparing itself to adopt new anti-money laundering (AML) laws, which will finally allow its regulator to start monitoring the crypto sector in the country. The laws will bring quite a few changes, some of which can even be considered major ones.

For example, all cryptocurrency exchanges in the country will be obligated to register. Not only that, but the exchanges themselves will have to enforce stricter AML programs, and make sure that their customers — particularly those who transact beyond certain limits — can present the source of their funds.

Things are changing in Canadian markets

Up until now, the crypto industry in Canada somehow managed to remain lax, particularly in terms of regulations. However, that is about to change now, as on July 10th, the government published a notice which states that exchanges will have to register with FinTRAC (Financial Transactions and Reports Analysis Centre of Canada).

The new law will require even the best digital crypto exchanges in the country to verify their clients’ identity, provided that the clients transact over C$1,000, which is around US$764. Of course, the transacted funds would have to be in cryptocurrency. In addition, any behavior that the exchange might consider ‘suspicious’ must also be reported immediately to the authorities.

Meanwhile, the exchanges will be obligated to keep transaction records and keep high compliance standards. To do this, they will also have to hire compliance officers.

By forcing these changes, it is believed that the crypto industry in Canada might remain at a higher standard. That way, it will be safely integrated into the mainstream financial industry once the time for such a move arrives. For now, it is likely too early to plan such a move, as banks and financial institutions still avoid the crypto sector. Their biggest issue is believed to be the former use of cryptocurrencies for funding criminal activities. However, with proper standards and rules that exchanges will have to obey, institutions might consider approaching the industry, as long as it remains at a high standard and under firm control and watchful eye of the regulator.

Negative consequences are more than likely

Of course, things might not go so smoothly as the authorities are hoping they will. In fact, it is possible that the new requirements might also have negative consequences on the Canadian crypto market. Some exchanges are bound to relocate offshore in order to avoid such regulations. Others, which already operate from outside of Canada, might simply start denying service to Canadian customers. Many in the US have seen the same treatment, and Americans do not have a lot of choices anymore when it comes to using different exchanges.

Meanwhile, there are also industry participants who welcomed the move, although there are quite a few who believe that the requirements are too strict. One example is Charlene Cieslik, Coinsquare’s Chief Anti-money laundering officer, who believes that identifying everyone who transacts C$1,000 or more is not possible. Not only that but trying to do so might even drive crypto trading back underground, which would be a major setback for the entire world.

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