The Canadian government has amended the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of 2000 to include a piece of Bitcoin regulation that would require any Bitcoin businesses, whether they are based inside or outside of Canada, to follow some pretty strict guidelines when conducting business transactions that overlap into Canadian financial areas. The bill to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of 2000 was first introduced in March, but was not passed by the Canadian parliament until June 19th. While Bitcoin will probably be the most heavily affected crypto-currency, since it is the most popular, this amendment is not limited to Bitcoin. The language of the legislation is such that it encompasses all crypto-currencies, stating:
“Division 19 of Part 6 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things, enhance the client identification, record keeping and registration requirements for financial institutions and intermediaries, refer to online casinos, and extend the application of the Act to persons and entities that deal in virtual currencies and foreign money services businesses.”
This piece of Bitcoin regulation would classify any businesses that deal mainly in the trading of Bitcoin, and other digital currencies, as Money Services Businesses. Upon being classified as a Money Services Business, any Bitcoin company conducting business in Canada would be subjected to a myriad of requirements, such as record keeping, verification procedures, suspicious transaction reporting, and registration requirements. This Bitcoin regulation also requires any Bitcoin company that conducts any kind of Bitcoin business within the realm of the Canadian economy to register with the Financial Transactions and Reports Analysis Centre of Canada. Failure to register with this bureau will result in the placement of hefty penalties on the business in question. These penalties include the public disclosure of the names of the companies who have failed to comply with the Bitcoin regulation, which would be extremely detrimental to any Bitcoin business trying to work with any banking institutions in Canada.
Potential Impact of Bitcoin Regulation
The legislation that implements this Bitcoin regulation extends to any Bitcoin business that does business in Canada, regardless of the company’s home country. If Robocoin wants to install a Bitcoin ATM in a Canadian city, it must comply with the new Bitcoin regulation. If a Canadian citizen buys or sells any amount of bitcoins from Coinbase, then Coinbase must comply with the Bitcoin regulation. The vastness of this Bitcoin regulation makes itself apparent in these two examples; every Bitcoin company in the world must comply with this Canadian Bitcoin regulation or else they will essentially be banned from Canada.
It cannot be said whether or not the Canadian Parliament passed the Bitcoin regulation in a deliberate attempt to limit the spread of Bitcoin in Canada. However, regardless of the intentions of Canadian lawmakers, this Bitcoin regulation could potentially put a substantial damper on the rate of acceptance of Bitcoin within the domestic Canadian economy. If exchanges and ATM providers decide against entering Canada, or terminate their already existing Canadian businesses, it will be harder for other local businesses -local coffee shops and bookstores- in Canadian cities to accept Bitcoin as a means of payment for their products because they would have no legal way to trade their bitcoins for fiat, which they currently have to do to help cover overhead. Furthermore, any foreign Bitcoin business looking to attract Canadian customers will be discouraged from doing so because of the Bitcoin regulation. Essentially, this Bitcoin regulation could make it so costly and burdensome to conduct Bitcoin trading activities that they may opt out of entering the Canadian financial sectors altogether.
Could this Bitcoin Regulation affect the Bitcoin Price?
When China attempted to ban Bitcoin outright, the Bitcoin price reacted very negatively. Although the Bitcoin regulation passed by Canada will not likely have as much of an impact as the Chinese “bans” did, due to it being merely regulation, and not a direct ban, it could still have some effect on the Bitcoin price. Any bad news in the Bitcoin community can have some impact on the Bitcoin price, and this passage of Bitcoin regulation is a pretty significant piece of news.
However, it seems as though this news has not affected the Bitcoin price, at least for the present. The Bitcoin price has spent most of the day (June 23, 2014) in the $580 range, hovering around $588 for the majority of the day, which is slightly lower then the $590 range that has prevailed on the markets for the past few days. This very small drop in the Bitcoin price is hardly the result of this piece of news from Canada. Since the Bitcoin price has only dropped a few dollars, and did not drop any further, suggests that it is the result of normal trading. Bitcoin price fluctuations that come in reaction to news stories are generally sudden, and either very deep or high, depending on whether or not it was good or bad news. While there is always a small possibility for this Bitcoin regulation to have a negative impact on the Bitcoin price, once the Bitcoin regulation starts actually being enforced, it is very unlikely that the Bitcoin regulation will have any impact on the Bitcoin price or the spread of Bitcoin in Canada. Most businesses that will be affected by this legislation are already working towards becoming compliant with this legislation- due to the fact that these companies have ran into similar legislation in other countries and now expect it to be present in countries like Canada. So it is likely that the initial lack of reaction of the Bitcoin price to this news is indicative of the future impacts of Canada’s Bitcoin regulation on the Bitcoin price, which are negligible at best.