Bruce McMeekin Law

What are “Dealers in Virtual Currencies”?

Is it just me? Or, is there really a gaping hole in the draft amendments to the PC(ML)TFA and its regulations when in comes to the intended regulation of digital currency?

The draft amendments, released for public review and comment on June 9, are intended, in part, to regulate businesses dealing in virtual currencies. They follow Bill C-31 , provided Royal Assent in 2014, that, subject to enactment, will require “dealers in virtual currencies” (“DVCs”) to register as MSBs. The Bill did not define DVCs, instead providing that would be left to the regulations. Yet, nowhere in the draft amendments can any such definition be found.

This is more than a technical glitch. That definition is how FINTRAC will obtain jurisdiction over DVCs, requiring their registration as MSBs, with all the attendant record keeping, reporting etc. responsibilities. No definition, no jurisdiction.

A second problem is that it is difficult to provide meaningful comment on something that doesn’t exist. This is particularly problematic for DVCs that believe that their particular operations should not be regulated and want to make that point during the comment period to the Department of Finance.

This oversight must be corrected. In the meantime, a contextual interpretation of the included draft amendments relating to virtual currencies, along with the existing legislation relating to MSBs, provides some insight as to the (likely) meaning of DVCs. Subject to any exemptions included in the promulgated or final regulations, including, possibly, that related to distributed ledgers included in the draft amendments, one should expect that the definition will attempt, at least, to capture businesses that are engaged in the transmission, receipt and exchange of virtual currencies. However, the best way of gauging Finance’s intentions is through direct engagement with it during the consultation process.