Since 2014, entities dealing in virtual currencies have been subject to Anti-Money Laundering Regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
The Financial Transactions and Report Analysis Center of Canada (FINTRAC) defines a virtual currency as “a digital representation of value that can be used for payment, investment or retail activities, such as buying and selling goods and services.”
What is the scope of the Travel Rule in Canada?
All financial entities (FEs), money services businesses (MSBs), foreign MSBs (FMSBs), which include entities "dealing in virtual currency" which are defined by the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as:
"Virtual currency exchange services include exchanging:
funds for virtual currency,
virtual currency for funds, or
virtual currency for another virtual currency.
Virtual currency transfer services include:
transferring virtual currency at the request of a client, or
receiving a transfer of virtual currency for remittance to a beneficiary".
It also applies to electronic funds transfer (EFT) or virtual currency (VC) transfers.
Who is the supervisory body for VASPs in Canada?
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
What is the Travel Rule threshold in Canada (FINTRAC)?
CAD 1000
What are FINTRAC's requirements for information to be exchanged?
the name, address and the account number or other reference number (if any) of the person or entity who requested the transfer (originator information); and
the name, address and the account number or other reference number (if any) of the beneficiary.
At the time of writing, there was no mention of unhosted wallets (also referred to as self-hosted wallets).
When do you need to comply with the Travel Rule in Canada?
1 June 2021. However, FINTRAC will only start the compliance assessment with those regulations from 1 April 2022.
Which regulations are applicable to the Canadian Travel Rule?
Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)
Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
Guidance on Travel Rule for electronic funds and virtual currency transfers
Guidance on Reporting Large Virtual Currency Transactions
What else do you need to know about the Travel Rule in Canada?
In Canada, each province and territory has its own rules and securities regulators. Moreover, in Canada, VASPs are more commonly referred to as crypto-asset trading platforms (CTPs).
As of 1 June 2020, entities engaged in virtual currencies are considered MSBs and must register with FINTRAC.
Not only do anti-money laundering (AML) Regulations apply to virtual asset service providers (VASPs), but also, in most cases, securities regulations may apply to VASPs who might need to get licensed.
The Canadian Securities Administrators (CSA) is an umbrella organisation of Canada's provincial and territorial securities regulators. It has published guidance in the form of several "staff notices" concerning virtual currencies to address the rapidly evolving developments related to virtual currencies. It has been confirmed that crypto exchanges do need to be registered with a securities regulator as they deal with "crypto contracts."
Reporting obligations: when receiving virtual currency in an amount equivalent to CAD 10 000 or more in a single transaction, VASPs must submit a large virtual currency transactions report to FINTRAC.
