In a landmark piece of legislation, the Canadian government passed a bill last Thursday regulating bitcoins and other forms of virtual currency.
The bill, titled “An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014 and Other Measures (Bill C-31),” is the first piece of legislation about virtual currencies to pass a national body of government.
The law features a number of important amendments that impact the way virtual currencies are taxed and regulated in the frozen north. Christine Duhaime, B.A., J.D., financial crime and certified anti-money laundering specialist of Duhaime Law, noted many of them in her blogpost.
According to Duhaime, the most direct impact the law will have on bitcoin and other virtual currencies is that they will be considered to be “money services business[es],” and be regulated as such. That means all Bitcoin transactions will be “subject to the record keeping, verification procedures, suspicious transaction reporting and registration requirements” under Canadian law. Similarly, Bitcoin sellers will be required to register with FINTRAC, a regulatory body in Canada, and must “implement a complete anti-money laundering compliance regime.”
Duhaime notes that this law not only applies to companies that are based in Canada, but also virtual currency companies that operate in Canada as well. That means wallets like Coinbase must register with FINTRAC and follow all the rules and regulations that a Canadian-based company has to. And if they don’t, they won’t be able to conduct any bitcoin-related business in Canada.
Interestingly, the phrase “dealing in virtual currency” wasn’t defined in the bill even though it comes up multiple times in the document. It’s still unknown how the Canadian government plans on defining what counts as a virtual currency.
The U.S. has still yet to pass any regulations regarding virtual currency or bitcoin, though it is expected. The IRS deemed virtual currencies as a commodity, not a currency, which means that bitcoin can be taxed as a property. Ripple and other virtual currency stakeholders are already lobbying DC lawmakers in hopes of influencing the direction the regulation will take.