In a new report by Canadian digital newspaper iPolitics, the Canadian House Finance Committee has recommended that to prevent any potential threat of money laundering, the government should start with the regulation of cryptocurrencies.
Per the publication, the committee suggested that during its review of the Proceeds of Crime Money Laundering and Terrorist Financing Act (PCMLTFA), which happens once every five years, the regulation of cryptocurrencies should be taken into consideration.
One of the many innovations brought about by modern technology, cryptocurrency is a form of digital currency that’s gained popularity amongst investors over the past years, with Bitcoin being the most well-known one. Nowadays, various types of these digital coins exist on the market, although their steady downfall that started back in January left investors (referred to as “HODLers”) hoping for a massive bull run soon.
Regulating the digital coins
Since February, the committee has held three meetings for the review, in which it has come up with three ways as to how the government can regulate the digital assets.
The first recommendation from the committee is to gain control of the exchange from fiat to cryptocurrency and vice versa. This defines the entity that will be conducting the exchange as a money-service business, hence, a way to insert regulation into the entire scenario. This recommendation is in line with a new crypto draft in Canada, which again defines crypto exchanges as money-service businesses.
The second recommendation is for the government to require cryptocurrency exchanges to have a license, similar to New York’s BitLicense. Suggestions were also given by financial adviser IJW & Co. as well as law firm Durand Morisseau LLP, stating how easy it is for crypto transactions in the currently unregulated market to be used for illegal activities.
The article reads: “Cryptocurrency transactions may be used by parties to swiftly move large amounts of wealth across borders, and that regulating (exchanges of fiat currencies for cryptocurrencies) would address the (anti-money-laundering) concerns of the cryptocurrency space.”
Last but not the least, the committee’s third recommendation for the government is to regulate the digital wallets used to keep the cryptocurrencies. According to the recommendation, doing so will render tracking much easier.
The government is then given a maximum of 120 days to reply to the recommendations, to be decided at the House of Commons.
An unregulated space
Due to its decentralized nature, cryptocurrencies tend to be much preferred by investors and enthusiasts alike, what with its exchanges being generally cheaper since no middle entity like financial institutions are involved.
However, this decentralized nature itself is perhaps one of the biggest cons of using cryptocurrency, as this makes it more susceptible to illegal activities such as money-laundering and fraud. As the world is catching up with the digital assets, various efforts, such as that of the Canadian House Finance Committee, are being pushed forward in an attempt to make the industry much safer.