All things considered for Bitcoin based value transfer, i.e Bitcoin remittances (money transfer)
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Many of you saw my tweet yesterday about the Bitcoin regulations in Canada. As usual, some journalists decided to write articles about my tweets without asking me for the full context :P Which means there has been a lot of misunderstanding. Particuarly, these regulations mean that we can lower the KYC requirements
and no longer require ID documents or bank account connections! We can also increase the daily transaction limit from $3,000 per day to $10,000 per day for unverified accounts. The main difference is that we now have a $1,000 per-transaction limit (instead of per day) and we must report suspicious transactions. It's important to read about our reporting requirements, as it is the main difference since pretty much every exchange was doing KYC anyway.
Hopefully you appreciate the transparency, and I'm available for questions!
Text below is copied from: https://medium.com/bull-bitcoin/bitcoin-exchanges-and-payment-processors-in-canada-are-now-regulated-as-money-service-businesses-1ca820575511
Bitcoin is money, regulated like money
Notice to Canadian Bitcoin users
If you are the user of a Canadian Bitcoin company, be assured that:
- These regulations only target virtual currency exchanges and virtual currency transmitters (e.g. payment processors, custodial wallets).
- No action on your part is currently required. It is businesses that have to comply, not users.
You may notice that the exchange service you are using has change its transactions limits or is now requiring more information from you.
You can stop reading this email now without any consequence! Otherwise, keep regarding if you are interested in my unique insights into this important topic!
Background on regulation
Today marks an important chapter for Bitcoin’s history in Canada: Bitcoin is officially regulated as money (virtual currency) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of Canada (PCMLTFA), under the jurisdiction of the Financial Transaction and Reports Analysis Centre of Canada (FINTRAC).
This is the culmination of 5 years of effort by numerous Bitcoin Canadian advocates collaborating with the Ministry of Finance, Fintrac and other Canadian government agencies.
It is important to note that there is no new Bitcoin law in Canada. In June of 2014, the Governor General of Canada (representing Her Majesty Queen Elizabeth II) gave royal asset to Bill C-31, voted by parliament under Stephen Harper’s Conservative government, which included amendments to the PCMLTFA to included Bitcoin companies (named “dealers in virtual currency”) as a category of Money Service Businesses.
Thereafter, FINTRAC engaged in the process of defining what exactly is meant by “dealing in virtual currency” and what particular rules would apply to the businesses in this category. Much of our work was centred around excluding things like non-custodial wallets, nodes, mining and other activities that were not related exchange or payments processing.
To give an idea, the other categories that apply to traditional fiat currency businesses are:
- Foreign exchange dealing
- Remitting or transmitting funds
- Issuing or deeming money order or similar negotiable instruments
When we say that Bitcoin is now regulated, what we mean is that these questions have been settled, officially published, and that they are now legally binding.
Businesses that are deemed to be “dealing in virtual currency” must register with FINTRAC as a money service business, just like they would if they were doing traditional currency exchange or payment processing.
There is no “license” required, which means that you do not need the government’s approval before you can operate a Bitcoin exchange business. However, when you operate a Money Service Business, you must register and comply with the laws… otherwise you risk jail time and large fines.
What activities are regulated as Money Service Business activity?
A virtual currency exchange transaction is defined as: “an exchange, at the request of another person or entity, of virtual currency for funds, funds for virtual currency or one virtual currency for another.” This includes, but is not limited to:
- Bitcoin trading platforms (orderbooks)
- Bitcoin exchange platforms (fixed-rate)
- Selling or buying Bitcoin OTC professionally
- Crypto-to-crypto trading (orderbook, fixed-rate or OTC)
- Custodial wallets
Notice to foreign Bitcoin companies with clients in Canada
Regardless of whether or not your business is based in Canada, you must register with FINTRAC as a Foreign Money Service Business, if:
- You direct your MSB services at persons or entities in Canada
- You provide these services to clients in Canada
How this affects BullBitcoin.com and Bylls.com
The regulation of Bitcoin exchange and payment services has always been inevitable. If we want Bitcoin to be considered as money, we must accept that it will be regulated like other monies. Our stance on the regulation issue has always been that Bitcoin exchanges and payment processors should be regulated like fiat currency exchanges and payment processors, no more, no less. This is the outcome we obtained.
To comply with these regulations, we are implementing a few changes to our Know-Your-Customer requirement and transaction limits which may paradoxically make your experience using Bull Bitcoin and Bylls even more private and convenient!
The bad news
- We are adding per-transaction limits in addition to daily volume limits.
- The per-transaction limit for accounts with limited verification is $1,000 (previously $3000). To conduct transactions over $1,000 you must get your account verified.
- We require users to provide their Date of Birth as a requirement to change their verification status to “Verified”.
- We require users to provide their Occupation as a requirement to change their verification status to “Verified”.
The good news
- We are increasing the daily volume limit from $3,000 to $10,000 for users that have the “limited” account verification status. Users with limited account verification can do multiple transactions as long as they are each below the $1,000 threshold and as long as they don’t exhibit suspicious behavior (see details below).
- Identity documents will no longer be required for users that can be identified using their credit files. They will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer.
- Connecting bank accounts to Bull Bitcoin using the flinks bank verification software will no longer be required for users that can be identified using their credit files. This will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer
To understand these regulations, we highly recommend reading this summary by our good friends and partners at Outlier Compliance.
Summary of our obligations
- We must identify users that are conducting transactions over $1,000.
- We must report transactions suspected of being involved in Money Laundering or Terrorist Financing to FINTRAC.
- We must keep records of all transactions.
- Generally, we must establish and adhere to policies and procedures to deter and detect Money Laundering and Terrorist Financing
The information required to perform a compliant know-your-customer validation:
- Full name
- Residential address
- Phone number
- Date of birth
Record keeping obligations:
- Date and time of the transaction
- All amounts and currency types involved
- Currency exchange rates used and their source
- Transaction ID, receiving address, sending address
- The user’s KYC info (name, address, date of birth and occupation)
Suspicious transaction reporting
Satoshi Portal is required to make suspicious transactions report to FINTRAC after we have detected a fact that amounts to reasonable grounds to suspect that one of your transactions is related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence.
Failure by Satoshi Portal Inc. to report a suspicious transaction could lead to up to five years imprisonment, a fine of up to $2,000,000, or both, for its executives.
We are not allowed to share with anyone other than FINTRAC, including our clients, the contents of a suspicious transaction report as well as the fact that a suspicious transaction report has been filed.
What is suspicious activity? Note for bitcoinca: this section applies ONLY to Bull Bitcoin. Most exchanges have much stricter interpretation of what is suspicious. You should operate under the assumption that using Coinjoin or TOR will get you flagged at some other exchanges even though it's okay for Bull Bitcoin. That is simply because we have a more sophisticated understanding of privacy best practices.
Identifying suspicious behavior is heavily dependent on the context of each transaction. We understand and take into account that for many of our customers, privacy and libertarian beliefs are of the utmost importance, and that some users may not know that the behavior they are engaging in is suspicious. When we are concerned or confused about the behaviors of our users, we endeavour to discuss it with them before jumping to conclusions.
In general, here are a few tips:
- Don’t provide false of misleading information. We will know right away if your date of birth, address and name don’t match.
- Don’t try to exploit loopholes in the KYC process.
- Don’t transact on behalf of someone else without telling us.
- Be cooperative with customer support.
Here are some examples of behavior that we do not consider suspicious:
- Coinjoin or other Bitcoin privacy techniques.
- Using VPNs, TOR or VOIP phones.
- Asking questions about, or criticizing, our privacy policies.
- Talking negatively about banks or government.
Here are some example indicators of behavior that would lead us to investigate whether or not a transaction is suspicious:
- Making statements about being involved with criminal activity.
- Saying you don’t want the government to know about your transactions.
- Asking advice about concealing source of funds or tax avoidance.
- Funding your account from a bank account that is not in your name.
- Conducting transactions on behalf of someone else without telling us.
- Trying to falsify your identity or impersonating someone else.
- Making multiple bill payments to the same recipient, or multiple Bitcoin purchases, in a way which seems structured specifically to avoid the $1,000 transaction amount KYC threshold.
- Continuing to perform transactions that are unnecessarily complex, inefficient and not cost-effective after having been advised otherwise by our staff.
What does this mean for Bitcoin?
It was always standard practice for Bitcoin companies to operate under the assumption they would eventually be regulated and adopt policies and procedures as if they were already regulated. The same practices used for legal KYC were already commonplace to mitigate fraud (chargebacks).
In addition, law enforcement and other government agencies in Canada were already issuing subpoenas and information requests to Bitcoin companies to obtain the information of users that were under investigation.
We suspect that cash-based Bitcoin exchanges, whether Bitcoin ATMs, physical Bitcoin exchanges or Peer-to-Peer trading, will be the most affected since they will no longer be able to operate without KYC and the absence of KYC was the primary feature that allowed them to justify charging such high fees and exchange rate premiums.
One thing is certain, as of today, there is no ambiguity whatsoever that Bitcoin is 100% legal and regulated in Canada!
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