In Quebec, a business that operates a virtual currency automated teller machine, such as a bitcoin ATM, or that provides a platform for trading virtual currencies, will now be required to obtain a license under the Money-Services Businesses Act (the “Act”). On February 12th, 2015, the Autorité des marchés financiers (the “AMF”) announced this change in a news release and published amendments to the Policy Statement to the Act, which clarified that “making available to the public a means of purchasing, with cash, virtual money from an automated distributor, without the intervention of a natural person” constitutes operating an automated teller machine for the purposes of the Act.
In the past year, bitcoin ATMs have been rapidly popping up all over the province, and especially in Montreal. The bitcoin ATM locator website http://coinatmradar.com/ currently reports 21 such ATM’s in operation in the province (18 in Montreal), compared with only one ATM operating in the province at this time last year. These bitcoin ATM operators and operators of other virtual currency trading platforms will now have to meet the obligations under the money service business licensing framework and should expect heightened oversight by the AMF. Specifically, an application for a permit as a money service business requires certain disclosure of information about the business, including the legal and corporate structure, a business plan, and information about any relevant employees and mandataries. A money service business is also required to maintain and update certain records and registers. Finally, licenses will only be issued to businesses that the AMF deems, having considered input from investigations by the Sûreté du Québec and local municipal police forces, to possess integrity and good moral character. The stakes for compliance are high: a money-service business that contravenes the obligations or commits offences under the Act could potentially be fined or have its licence revoked.
The AMF, despite the decision to oversee the operators of virtual currency ATMs and online trading platforms, reminds consumers in its news release that it has not regulated virtual currency itself. In particular, the AMF notes that virtual currency transactions remain not covered by financial services compensation fund (protecting victims of fraud) or the deposit insurance fund (guaranteeing the deposits of up to $100,000 per person in the case of the insolvency of the deposit institution). As such, the AMF warns of the continued volatility, liquidity and fraud risks associated with virtual currency transactions.
The AMF’s announcement comes in the wake of recent amendments to the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act, extending the scope of existing federal anti-money laundering laws to persons “dealing in virtual currencies”, by including these within the definition of “money services business”. Regulations in respect of these amendments detailing what type of activity will constitute “dealing in virtual currencies” have not yet been issued, and it will be interesting to see the extent to which they parallel the approach taken by the AMF.