Canadian regulator takes lighter view of Bitcoin

Bitcoin exchanges are not required to register with the country's anti-money laundering regulator

It appears Canada's anti-money laundering regulator will leave Bitcoin exchanges in the country alone for now.

LibertyBit, which exchanges the virtual currency Bitcoin for U.S. and Canadian dollars, has been told it does not have to register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), said CEO Paul Szczesny, via email on Tuesday.

FINTRAC, which was created in 2000, is responsible for investigating and preventing money-laundering and activities used to fund terrorism.

But concerns have been raised in some quarters that the high degree of anonymity of Bitcoin transactions makes them attractive for criminal purposes such as tax evasion.

Szczesny wrote that FINTRAC told LibertyBit in an email that it was not considered a Money Service Business, which would require registering with FINTRAC. The agency told LibertyBit that since the transfer of funds is a corollary of its actual service of trading virtual currency, it need not register.

The Register reported on Monday that another Canadian Bitcoin exchange, Cadbitcoin, received the same advice from FINTRAC.

How governments will handle Bitcoin could have a dramatic effect on its adoption. In March, the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Treasury Department, issued guidance indicating Bitcoin exchanges are money transmitting businesses and need to register.

Last week, a federal court ordered the seizure of a Dwolla account belonging to Mt. Gox, the world's largest Bitcoin exchange, based in Tokyo. Mt. Gox used the U.S.-based account to receive money from U.S. citizens. Dwolla, a payments company, was not a target of the seizure order.

The seizure order said Mt. Gox's CEO, Mark Karpeles, answered negatively on a questionnaire when asked if its U.S. branch, Mutum Sigillum LLC, exchanged currency or transmitted funds based on instructions to customers.

Canada's lighter view of Bitcoin could make it easier for fledgling Bitcoin startups, which would be saved the expense of meeting government reporting requirements. Aside from the regulation issue, many Bitcoin exchanges have gone out of business due to hacking or other problems.

Bitcoin transactions can be executed for free using peer-to-peer software. Transactions are performed by sending bitcoins from one 32-character alpha-numeric address to another, and are visible in a public ledger.

Send news tips and comments to jeremy_kirk@idg.com. Follow me on Twitter: @jeremy_kirk

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Tags internetInternet-based applications and servicesLibertyBit

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Jeremy Kirk

IDG News Service
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