REGULATIONS

Crypto Travel Rule Regulations in

Canada

by

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

🇨🇦
Travel Rule required from
Travel Rule regulation still pending
March 31, 2022
Content last updated
August 10, 2023

The Crypto Travel Rule has been in force in Canada since June 1, 2021, and was implemented through changes introduced to the country's anti-money laundering and counter-terrorism financing framework. In addition to crypto Travel Rule requirements, Canadian VASPs are subject to record-keeping and reporting obligations that expand the need to collect and verify originator and beneficiary information.

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1. Is cryptocurrency legal in Canada?

Cryptocurrencies are legal in Canada, although they do not qualify as legal tender. [1] 

2. Are there AML crypto regulations in Canada?

Yes. In Canada, crypto AML regulations are outlined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). These instruments regulate the AML/CTF obligations of entities dealing in virtual currencies [2]. In our interpretation, the definition of virtual currencies includes digital representations of value and private keys that enable access to such digital representations of value.

3. Is the Crypto Travel Rule mandated in Canada?

Yes, the crypto travel rule is mandated in Canada. The Travel Rule was extended to virtual currency transactions through an amendment to the PCMLTFA [3] and is further regulated by FINTRAC's guidance on Travel Rule for electronic funds and virtual currency transfers. Both instruments have been effective since June 1, 2021.

4. Who regulates cryptocurrency in Canada?

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is responsible for supervising the implementation of the travel rule in Canada. Depending on the specific activity being carried out, other regulators, such as provincial and territorial securities regulators and the Investment Industry Regulatory Organization of Canada (IIROC), may have regulatory and supervisory authority.

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FATF Travel Rule requirements in Canada

1. Are there licensing or registration requirements for VASPs in Canada?

Yes. The licensing and registration requirements applicable to VASPs in Canada must be assessed considering the specific activity carried out. For instance, Crypto Asset Trading Platforms (CTPs) may be required to register with the Investment Industry Regulatory Organization of Canada (IIROC) if they qualify as marketplace or dealer platforms. The Joint CSA/IIROC Staff Notice 21‑329 provides more guidance in this respect.

2. When does the Crypto Travel Rule go into effect in Canada?

The crypto Travel Rule has been in effect in Canada since June 1, 2021.

3. Does Canada permit a grace period to comply with the Crypto Travel Rule?

Although Canada does not foresee a formal grace period for compliance with the crypto travel rule, FINTRAC issued a notice stating that until March 31, 2022, FINTRAC will only assess compliance with the regulatory requirements in effect before June 1, 2021 (which is when the Travel Rule came into force).

However:

  • FINTRAC expects that between June 1, 2021, and March 31, 2022, covered entities will update their compliance programs to reflect the new regulatory requirements;
  • FINTRAC may nonetheless assess transactional information for a period before April 1, 2022.

Complying with the FATF Crypto Travel Rule in Canada

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1. What is the minimum threshold for the Crypto Travel Rule in Canada?

The minimum threshold for the crypto travel rule in Canada is CAD 1,000. The travel rule applies when VASPs are required to keep records with respect to a virtual currency transaction [4], which is the case when transferring or receiving CAD 1,000 or more in virtual currency. [5]

2. What personally identifiable information is required to be shared for the Crypto Travel Rule in Canada?

For compliance with the crypto travel rule in Canada, the following information needs to be shared between VASPs [6]:

It is worth mentioning that VASPs' record-keeping and reporting obligations cover other types of information. Most relevantly, when VASPs receive CAD 10,000 or more in virtual currency, they are required to (i) keep records that include, for instance, the name, address, date of birth, and occupation of "any person involved in the transaction," including the person from whom the VASP received the VC (see FINTRAC's guidance on Record keeping requirements for financial entities and money services businesses), and (ii) file a Large Virtual Currency Transaction Report (LVCTR) to FINTRAC [7].

3. Are there differences in customer PII requirements for cross-border transfers versus transfers within Canada?

The information that needs to be shared between VASPs is the same for cross-border transfers and transfers within Canada.

4. What are the non-custodial or self-hosted wallet requirements in Canada?

To our knowledge, Canada has not yet specified the requirements for transactions involving non-custodial or self-hosted wallets.

Why choose Notabene for Crypto Travel Rule Compliance in Canada

Notabene's live end-to-end Travel Rule compliance solution allows VASPs to comply with local regulators' requirements. Our solution facilitates the collection and verification of information about the originator and beneficiary of a transaction and, through a Rules Engine, enables VASPs to customize automatic reactions to Travel Rule requests according to different criteria.

References

[1] Government of Canada, Currency Act, 2018, pg 2, paragraph 8(1).
[2] Government of Canada, Proceeds of Crime (Money Laundering) and Terrorist Financing Act, page PCMLTFA, pgs 5-6, para 5 (h) iii.
[3] Government of Canada, Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2019: SOR/2020-112, 2020. 
[4] Government of Canada, Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, 2022, pg 101, paragraph 124.1(1)
[5] Government of Canada, Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, 2022, pg 21, paras 12(r-s), pg 26, paras 14(1) (j-k), pgs 41-42, paras 36 (g-h).

[6] Government of Canada, Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, 2022, pg 101, paras 124.1 (1) (a).

[7]  Reporting large virtual currency transactions to FINTRAC

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