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Canada’s House Finance Committee plans to change the way cryptocurrencies are regulated in order to prevent money laundering. Every 5 years the Canadian government is required to undertake a review of the “Proceeds of Crime (Money Laundering) and Terrorist Financing Act” (PCMLTFA). The review started in February this year, and more than 70 expert witnesses contributed across 18 meetings.
There has long been concern about the use of cryptocurrency in money laundering and illegal activity, and not just in Canada. The anonymous nature of cryptocurrencies makes them an attractive option for criminals looking to exploit the system.
The review has resulted in three recommendations going forward:
- If cryptocurrency is converted from fiat, then it should be regulated. (fiat is a currency that is considered legal tender.)
- Cryptocurrency exchanges should require a license.
- The government should regulate crypto-wallets. This will enable police to investigate fraud if there are any suspicious purchases.
The government is expected to review the recommendations to the PCMLTFA and provide a response within 120 days.
If there is any public backlash to these recommendations it is likely to revolve around recommendation number 3. If we look at the second recommendation, that cryptocurrency exchanges should require a license, some states such as New York have already implemented this without too much trouble. However, regulating crypto wallets is likely to get some people’s backs up. It challenges the notion of privacy while using crypto. One of the main selling points of crypto is that it puts the power back in the people’s hands. You no longer have to authenticate yourself with an institution who holds your data and ultimately decides whether you can access your own account. It flips this notion and puts the user in control by way of private keys.
Although we are yet to see how this regulation of crypto wallets would work, there’s a real possibility it would require you to identify and authenticate yourself for access to your wallet. This is similar to how traditional banking works, and cryptocurrency was in part created as a way to move forward from traditional banking.
People have different motives for using cryptocurrency, so this won’t be a hot topic for everyone. However, for those who do have an issue, this will be a big issue for them. There is a growing trend in the public in favor of data protection and having ownership over your digital footprint. For those very serious about this topic, cryptocurrency and blockchain offer a safe haven from financial oligarchs who hold the lock and key to your identity.