Financial Transactions and Reports Analysis Centre of Canada
"A Look At The Updated FINTRAC Cryptocurrency Regulations"
Is Bitcoin Legal In Canada - PCCEX Canadian Cryptocurrency ...
Fintrac: Kanada Regulieren Bitcoin - Crypto - 2020
Official Community Forum of Coinberry - Buy Bitcoin instantly in Canada with Coinberry, the only FINTRAC registered & PIPEDA compliant crypto trading platform trusted by the Canadian Government. https://blog.coinberry.com/
I was depositing $3k cash in 50s into the BMO account of an OTC trading desk and got flagged by Fintrac. They collect my DL, address, phone number, asked my relationship to the company.. I said I was "a client" Does anyone know if something might happen next or will that be the end of it?
The significant KYC at Canadian exchanges is stopping my peers from using them. Join me on bisq!
I'm starting to see the tangible impacts of the new fintrac applied regulations on the Canadian space. It is pretty much impossible to explain to a software engineer that newton or bullbitcoin function via plaid/flinks and the scraping of bank portal information with plaintext credentials and have them want to use that service. Likewise it is painfully obvious that handing off a dozen privileged documents is equally devastating to privacy, onboarding convenience, and user security. All these additional consumer risks in exchange for no additional consumer protections. It is with this in mind I'm moving to bisq and trying to setup my peers there as well. The bisq CAD market is however very low volume. If you share these concerns you might consider putting some orders up as well, encouraging your friends. Together we can enjoy the fruits of decentralized p2p money. Canada's attack on fungibility is the exact opposite of that. A "shame on you" to those who lobbied in favour of this present situation and a "shame on you" to our government and regulatory bodies. We have decentralized programmable money that is uniquely in a position to reduce risk and instead these regulations have increased risk. I'm encouraging my peers to buy small amounts of bitcoin at low KYC places like ATM's and then continue buying on bisq. If more people would do the same we can really improve the Canadian bitcoin marketplace. If you're an exchange and you want to claim your hands are tied by these regulations or they are good I offer you this warning: lobby for the consumer interest or we'll make you irrelevant.
[FULL ANALYSIS] Bitcoin exchanges and payment processors in Canada are now regulated as Money Service Businesses
Hello Bitcoiners! Many of you saw my tweet yesterday about the Bitcoin regulations in Canada. As usual, some journalists decided to write articles about my tweets without asking me for the full context :P Which means there has been a lot of misunderstanding. Particuarly, these regulations mean that we can lower the KYC requirements and no longer require ID documents or bank account connections! We can also increase the daily transaction limit from $3,000 per day to $10,000 per day for unverified accounts. The main difference is that we now have a $1,000 per-transaction limit (instead of per day) and we must report suspicious transactions. It's important to read about our reporting requirements, as it is the main difference since pretty much every exchange was doing KYC anyway. Hopefully you appreciate the transparency, and I'm available for questions! Cheers, Francis ********************************************* Text below is copied from: https://medium.com/bull-bitcoin/bitcoin-exchanges-and-payment-processors-in-canada-are-now-regulated-as-money-service-businesses-1ca820575511
Bitcoin is money, regulated like money
Notice to Canadian Bitcoin users
If you are the user of a Canadian Bitcoin company, be assured that:
These regulations only target virtual currency exchanges and virtual currency transmitters (e.g. payment processors, custodial wallets).
No action on your part is currently required. It is businesses that have to comply, not users.
You may notice that the exchange service you are using has change its transactions limits or is now requiring more information from you. You can stop reading this email now without any consequence! Otherwise, keep regarding if you are interested in my unique insights into this important topic!
Background on regulation
Today marks an important chapter for Bitcoin’s history in Canada: Bitcoin is officially regulated as money (virtual currency) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of Canada (PCMLTFA), under the jurisdiction of the Financial Transaction and Reports Analysis Centre of Canada (FINTRAC). This is the culmination of 5 years of effort by numerous Bitcoin Canadian advocates collaborating with the Ministry of Finance, Fintrac and other Canadian government agencies. It is important to note that there is no new Bitcoin law in Canada. In June of 2014, the Governor General of Canada (representing Her Majesty Queen Elizabeth II) gave royal asset to Bill C-31, voted by parliament under Stephen Harper’s Conservative government, which included amendments to the PCMLTFA to included Bitcoin companies (named “dealers in virtual currency”) as a category of Money Service Businesses. Thereafter, FINTRAC engaged in the process of defining what exactly is meant by “dealing in virtual currency” and what particular rules would apply to the businesses in this category. Much of our work was centred around excluding things like non-custodial wallets, nodes, mining and other activities that were not related exchange or payments processing. To give an idea, the other categories that apply to traditional fiat currency businesses are:
Foreign exchange dealing
Remitting or transmitting funds
Issuing or deeming money order or similar negotiable instruments
When we say that Bitcoin is now regulated, what we mean is that these questions have been settled, officially published, and that they are now legally binding. Businesses that are deemed to be “dealing in virtual currency” must register with FINTRAC as a money service business, just like they would if they were doing traditional currency exchange or payment processing. There is no “license” required, which means that you do not need the government’s approval before you can operate a Bitcoin exchange business. However, when you operate a Money Service Business, you must register and comply with the laws… otherwise you risk jail time and large fines.
What activities are regulated as Money Service Business activity?
A virtual currency exchange transaction is defined as: “an exchange, at the request of another person or entity, of virtual currency for funds, funds for virtual currency or one virtual currency for another.” This includes, but is not limited to:
Bitcoin trading platforms (orderbooks)
Bitcoin exchange platforms (fixed-rate)
Selling or buying Bitcoin OTC professionally
Crypto-to-crypto trading (orderbook, fixed-rate or OTC)
Notice to foreign Bitcoin companies with clients in Canada
Regardless of whether or not your business is based in Canada, you must register with FINTRAC as a Foreign Money Service Business, if:
You direct your MSB services at persons or entities in Canada
The regulation of Bitcoin exchange and payment services has always been inevitable. If we want Bitcoin to be considered as money, we must accept that it will be regulated like other monies. Our stance on the regulation issue has always been that Bitcoin exchanges and payment processors should be regulated like fiat currency exchanges and payment processors, no more, no less. This is the outcome we obtained. To comply with these regulations, we are implementing a few changes to our Know-Your-Customer requirement and transaction limits which may paradoxically make your experience using Bull Bitcoin and Bylls even more private and convenient!
The bad news
We are adding per-transaction limits in addition to daily volume limits.
The per-transaction limit for accounts with limited verification is $1,000 (previously $3000). To conduct transactions over $1,000 you must get your account verified.
We require users to provide their Date of Birth as a requirement to change their verification status to “Verified”.
We require users to provide their Occupation as a requirement to change their verification status to “Verified”.
The good news
We are increasing the daily volume limit from $3,000 to $10,000 for users that have the “limited” account verification status. Users with limited account verification can do multiple transactions as long as they are each below the $1,000 threshold and as long as they don’t exhibit suspicious behavior (see details below).
Identity documents will no longer be required for users that can be identified using their credit files. They will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer.
Connecting bank accounts to Bull Bitcoin using the flinks bank verification software will no longer be required for users that can be identified using their credit files. This will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer
The user’s KYC info (name, address, date of birth and occupation)
Suspicious transaction reporting
Satoshi Portal is required to make suspicious transactions report to FINTRAC after we have detected a fact that amounts to reasonable grounds to suspect that one of your transactions is related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence. Failure by Satoshi Portal Inc. to report a suspicious transaction could lead to up to five years imprisonment, a fine of up to $2,000,000, or both, for its executives. We are not allowed to share with anyone other than FINTRAC, including our clients, the contents of a suspicious transaction report as well as the fact that a suspicious transaction report has been filed.
What is suspicious activity?
Note forbitcoinca: this section applies ONLY to Bull Bitcoin. Most exchanges have much stricter interpretation of what is suspicious. You should operate under the assumption that using Coinjoin or TOR will get you flagged at some other exchanges even though it's okay for Bull Bitcoin. That is simply because we have a more sophisticated understanding of privacy best practices. Identifying suspicious behavior is heavily dependent on the context of each transaction. We understand and take into account that for many of our customers, privacy and libertarian beliefs are of the utmost importance, and that some users may not know that the behavior they are engaging in is suspicious. When we are concerned or confused about the behaviors of our users, we endeavour to discuss it with them before jumping to conclusions. In general, here are a few tips:
Don’t provide false of misleading information. We will know right away if your date of birth, address and name don’t match.
Don’t try to exploit loopholes in the KYC process.
Don’t transact on behalf of someone else without telling us.
Be cooperative with customer support.
Here are some examples of behavior that we do not consider suspicious:
Coinjoin or other Bitcoin privacy techniques.
Using VPNs, TOR or VOIP phones.
Asking questions about, or criticizing, our privacy policies.
Talking negatively about banks or government.
Here are some example indicators of behavior that would lead us to investigate whether or not a transaction is suspicious:
Making statements about being involved with criminal activity.
Saying you don’t want the government to know about your transactions.
Asking advice about concealing source of funds or tax avoidance.
Funding your account from a bank account that is not in your name.
Conducting transactions on behalf of someone else without telling us.
Trying to falsify your identity or impersonating someone else.
Making multiple bill payments to the same recipient, or multiple Bitcoin purchases, in a way which seems structured specifically to avoid the $1,000 transaction amount KYC threshold.
Continuing to perform transactions that are unnecessarily complex, inefficient and not cost-effective after having been advised otherwise by our staff.
What does this mean for Bitcoin?
It was always standard practice for Bitcoin companies to operate under the assumption they would eventually be regulated and adopt policies and procedures as if they were already regulated. The same practices used for legal KYC were already commonplace to mitigate fraud (chargebacks). In addition, law enforcement and other government agencies in Canada were already issuing subpoenas and information requests to Bitcoin companies to obtain the information of users that were under investigation. We suspect that cash-based Bitcoin exchanges, whether Bitcoin ATMs, physical Bitcoin exchanges or Peer-to-Peer trading, will be the most affected since they will no longer be able to operate without KYC and the absence of KYC was the primary feature that allowed them to justify charging such high fees and exchange rate premiums. One thing is certain, as of today, there is no ambiguity whatsoever that Bitcoin is 100% legal and regulated in Canada!
Building the infrastructure for the Bitcoin Standard in Canada before the collapse of fiat currencies is the critical mission objective that drives innovation at Bull Bitcoin. We are very excited to announce an important milestone in fulfilling this duty: the public release of Liquid CAD, our newest product designed to accelerate and facilitate the adoption of Bitcoin. Liquid CAD is a non-custodial prepaid payment system denominated in Canadian dollars. Units of Liquid CAD (L-CAD) consist of vouchers issued on the Liquid Network as confidential bearer assets that can be transacted peer-to-peer using a Liquid wallet. Users acquire Liquid CAD by withdrawing their account balance out of Bull Bitcoin, by purchasing Liquid CAD with Bitcoin on Bull Bitcoin, by using the Liquid CAD withdrawal method on other Bitcoin liquidity providers such as Aquanow or by accepting L-CAD as method of payment.
L-CAD assets can only be redeemed for Bitcoin. They cannot be redeemed for a fiat currency payment.
Liquid CAD is a unique project rethinking the concept of fiat-pegged assets, avoiding the banking business model of “fiatcoin” (aka stablecoins) in favor of a prepaid payments model entirely centred around Bitcoin on-ramp and off-ramp. Liquid CAD is not a currency, nor is it a security: it is a prepaid card. Importantly, the business model of Liquid CAD is not to collect interest on funds in our custody, unlike fiatcoins, but rather to drive the sales of Bitcoin from which we derive our revenue and we benefit from Liquid CAD assets being cashed out and thus removed from our balance sheet. Bull Bitcoin does not get any revenue from interest. Every time an L-CAD token is purchased by a user, the amount of dollars deposited on Bull Bitcoin is guaranteed to one day be used by someone to purchase Bitcoin. It’s a one-way street: once a unit of fiat is tokenized as L-CAD, it’s never going back to its off-chain fiat form and will ultimately result in a buy order on a Bitcoin trading platform. The Liquid CAD logo is a drop of blood because our objective is to accelerate “fiat bleed”, a phenomenon best described by Pierre Rochard in his magnificent essay Speculative Attack:
“Bitcoin will not be eagerly adopted by the mainstream, it will be forced upon them. Forced, as in “compelled by economic reality”. People will be forced to pay with bitcoins, not because of ‘the technology’, but because no one will accept their worthless fiat for payments. Contrary to popular belief, good money drives out bad. This “driving out” has started as a small fiat bleed. It will rapidly escalate into Class IV hemorrhaging due to speculative attacks on weak fiat currencies. The end result will be hyperbitcoinization, i.e. “your money is no good here. Bitcoins are not just good money, they are the best money. The Bitcoin network has the best monetary policy and the best brand. We should therefore expect that bitcoins will drive out bad, weak currencies. My own prediction is that slow bleed has been accelerating and is only the first step. The second step will be speculative attacks that use bitcoins as a platform. The third and final step will be hyperbitcoinization.”
Different representations of Canadian dollars compete to be used as payment methods (cash, bank balances, PayPal balances, closed-loop prepaid cards, open-loop prepaid cards, etc.) and that the winner will be the one that has the best Bitcoin saleability, i.e. which can be most easily sold for Bitcoin at a moment’s notice. We’re very proud to provide this alternative payment method to Canadians in a time where the banking system is falling deeper into crisis, especially as the Canadian dollar is demonstrating itself to be one of the most pointless and weakest currencies that nobody really wants to hold. Finally, we’re very happy to be partnering with Aquanow, our recommended institutional liquidity provider for high-volume BTC-CAD trading. They will accept Liquid CAD deposits and withdrawals as being interchangeable with Canadian dollars. We hope that Liquid CAD will become the standard representation of Canadian dollar value among Canadian Bitcoin users.
Liquid Bitcoin (L-BTC) integration
In addition to Liquid CAD, Bull Bitcoin is also announcing that Liquid Bitcoin (L-BTC) payments are now supported interchangeably with Bitcoin transactions for all Bull Bitcoin services. This means that our users can buy, sell and spend L-BTC instead of BTC. Canadian Bitcoin traders can purchase L-BTC from BullBitcoin.com and fund their international trading accounts with L-BTC using ultra fast and cheap confidential transactions. They can also cash-out their Bitcoin balance as L-BTC from these platforms and sell those L-BTC for fiat on Bylls.com, avoiding risky and expensive international wire transfers to unknown and untrusted foreign banks. The transactional benefits of L-BTC are very potent:
Transaction amounts are hidden, in compliance with Canada’s strict privacy protection laws
Observers cannot tell whether the transaction is L-BTC or any other asset
Confirmation times are 1 minute
Transaction fees are very low (< 0.05$)
Disclaimer: Liquid Bitcoin (L-BTC) is not the same as Bitcoin (BTC). L-BTC Liquid Network assets are IOUs for Bitcoin held in a multisignature contract by the Liquid Network federation. The custody of the underlying Bitcoin is managed by a decentralized network of 15 members which process transactions and withdrawals from the multisignature contract according to the Liquid Federation protocol rules.
Liquid CAD detailed overview
Peer-to-peer prepaid payments by Bull Bitcoin
Liquid CAD is a non-custodial prepaid payment system denominated in Canadian dollars. Units of Liquid CAD (L-CAD) consist of vouchers issued on the Liquid Network as confidential bearer assets that can be transacted peer-to-peer using a Liquid wallet. Users acquire Liquid CAD by withdrawing their account balance out of the Bull Bitcoin, by purchasing Liquid CAD with Bitcoin on Bull Bitcoin, by using the Liquid CAD withdrawal method on other Bitcoin liquidity providers such as Aquanow or by accepting L-CAD as method of payment.
A new payment method in Canada
Liquid CAD can be used by anyone to send and receive payments denominated in Canadian dollars. Because of the permissionless nature of the Liquid Network, Bull Bitcoin cannot prevent Liquid CAD from being traded on secondary markets. Merchants, individuals and institutions must accept that only Bull Bitcoin can guarantee redemption of the L-CAD and that this redemption will be exclusively paid out in Bitcoin. Accepting Liquid CAD as payment is, in effect, the same as accepting gift cards as payment. However, Bitcoin being the most liquid commodity on the market, it can be transformed into any other currency easily for example using services such a Bylls which allow Canadians to pay all their utility bills, send bank transfers to third parties or sell Bitcoin to their bank account.
Making Canadian dollars bleed into Bitcoin
The purpose of Liquid CAD is to facilitate the transfer fiat in the context of the purchase and sale of Bitcoin and providing innovative new services that help Bitcoin users hedge the value of Canadian dollars against Bitcoin in the context of their commercial transactions. Our goal is to create a payment method that is specifically targeting Bitcoin users that wish to liquidate Canadian dollar payments for Bitcoin. Our mission is to accelerate the phenomenon known as “fiat bleed” whereby Canadians will gradually abandon inferior money (such as the Canadian dollar) for the superior Bitcoin alternative. Every Liquid CAD issued will ultimately be exchanged into Bitcoin. We are excited for the day Liquid CAD will be made obsolete by the inevitable hyperbitcoinization of the Canadian economy.
Like all other closed-loop prepaid instruments, Liquid CAD has counterparty risk. The owners are trusting that they will eventually be able to use Liquid CAD as a payment method on the Bull Bitcoin platform to fund their account and purchase Bitcoin. When a Bull Bitcoin user withdraws his Bull Bitcoin account balance as an L-CAD token, the Canadian dollars he used to fund this balance remains in our possession in the same manner as regular Bull Bitcoin vouchers. These funds are used to execute Bitcoin purchases when L-CAD owners decide to redeem their L-CAD for Bitcoin. In essence, each L-CAD is “backed” by the Canadian dollar deposit of the user that withdraws it from the platform in the first place.
Benefits of using and accepting Liquid CAD for payments
Irreversible, non-custodial and no bank required
Liquid CAD payments cannot be charged back, cancelled, delayed or frozen. There is no intermediary between the sender and the recipient. It is a bearer asset: whoever owns the keys owns the coins. It is a perfect way to accept payments or transact securely without depending on banks and payment processors. Canadians can use Liquid CAD to purchase Bitcoin and then use Bylls.com to pay billers, personal payees or simply sell Bitcoin to their bank account.
Fast transaction and cheap fees
Liquid Network transactions are sent and received instantly and require 1 minute for settlement. Transaction fees paid using Liquid Bitcoin can be as low as 300 satoshis per transaction (a few cents). In order to benefit from these cheap fees, make sure to download the latest version of the Elements software and ensure that the minimum transaction fee is set at 100 satoshis per kilobye. It only takes a few minutes to set up a free Liquid Network wallet, such a Green Wallet by blockstream.
Unlike Bitcoin, transactions between the sender and the recipient are encrypted. It is impossible for third parties observing Liquid CAD transactions on a block explorer to determine the amount of the transaction. In addition, it’s also impossible to even know you are using Liquid CAD, since the data identifying the asset itself is also encrypted!
What are the use-cases of Liquid CAD?
Buying and selling Bitcoin
The primary use-case of Liquid CAD is to make it easier to buy and sell Bitcoin on the Bull Bitcoin platform. By withdrawing their balance from Bull Bitcoin, users are reducing some (but not all) of the custody risk associated with keeping fiat currency on an exchange. For example, use Liquid CAD to create your own non-custodial dollar-cost-averaging schedule!
Onboarding new Bitcoin users
New users can be overwhelmed by the experience of dealing with banks to buy Bitcoin (and the heavier KYC process of account funding). You may be tempted to buy Bitcoin for them, but that will impose a lot of burdens on you. It’s much easier to set them up with a Green wallet, send them Liquid CAD and show them how to use Bull Bitcoin! They decide when is the right time for them to invest, with a lower KYC burden.
Hedging Bitcoin price
You may believe the price of Bitcoin will go down in the short term, but you still want to hold Bitcoin in the long term. Normally you have two options: short the Bitcoin price (very risky!) or sell your Bitcoin and receive Canadian dollars in your bank account (inconvenient!). By selling your Bitcoin for Liquid CAD, you can lock in the value of Bitcoin right now and buy them back later without needing to use your bank account or taking risks with leverage.
As a merchant, you want to receive the settlement of payments in Bitcoin. But this imposes a burden on your customers, which have to deal with the Bitcoin price volatility when they are paying you. Ask your clients to pay you with Liquid CAD, and you can get the settlement with Bitcoin on your own terms.
Payroll and suppliers
What if your staff or suppliers want to get paid in Bitcoin? It can be very difficult, because this means you are effectively buying Bitcoin on their behalf. Instead, you can pay them in Liquid CAD and let them deal with the process of choosing the exchange rate and using their own wallet. Let them deal with the tax burden, exchange rates and Bitcoin wallet security.
List of Bull Bitcoin Liquid Network features
Withdraw account balance as L-CAD
This is conceptually the same as “buying” Liquid CAD with your account balance. We call it “Withdrawing L-CAD” because on the Bull Bitcoin platform, we consider L-CAD and CAD to be interchangeable and fungible.
Fund account balance with L-CAD
To redeem Liquid CAD for Bitcoin, users need to first fund their account by selecting the “Deposit L-CAD” payment method. Bull Bitcoin users must always fund their account first before buying Bitcoin, and then purchase Bitcoin with their account balances. Reminder: account balances cannot be withdraw as fiat payments, but can later be withdrawn again as L-CAD.
Sell Bitcoin for L-CAD
You can sell Bitcoin and receive Liquid CAD payments instead of a bill payment, personal payee payment or bank payment. As soon as the Bitcoin transaction is confirmed, the Liquid CAD transaction is sent to the address you provided.
Liquid Bitcoin (L-BTC) and Bitcoin interchangeability
For every service which involves a Bitcoin payment, the user can substitute traditional Bitcoin payments for Liquid Bitcoin payments. This includes:
Crypto Regulation in Countries which witnessed Spike in Crypto Interest
CoinMarketCap, one of the most preferred sources for crypto market capitulation has recently released the graph of countries that have registered a surge in crypto usage. The report named nine countries including Nigeria, Australia, Spain, Canada, Mexico, U.K., Colombia, India, and Pakistan which marked huge growth in Cryptocurrency Interest. However, it is pivotal to understand the type of crypto regulations, frameworks ad polices these countries are entertaining. Nigeria - With Nigeria being one of the biggest countries in the world population-wise, it also boasts of being one of the leading countries in Africa in terms of GDP boasting of about $500 billion nominal GDP returns. Taking a look at the crypto regulation in Nigeria, Bitcoin and all other forms of crypto are all legal although the Security Exchange Commission in the country has warned the population of the high risk involved. With the previous move by the government of Nigeria to ban crypto trading, the regulations are still unclear with the government issuing strong warnings of the volatility in the market. Spain - Spain mirrors Nigeria in the way that digital assets are approached in the country with the European nation not having a single regulation when it comes to crypto adoption. The Spanish government joined forces with the Spanish Security and Exchange Commission to teach investors on the dangers of trading in crypto assets. Even with the absence of regulations, the government has said that it does not see crypto as a means of tender, they may be referred to as securities. Australia - As far back as 2017, when Bitcoin was trying to make its mark in the financial market, Australia was one of the few countries that moved swiftly to encourage the budding investment. The government declared the digital assets a legal investment in the country and as such is treated as property while being subject to Capital Gains Tax. Previously, Australia subjected crypto assets to a double taxation scheme with the assets classed under the Goods and Services Tax but the recent change has encouraged a widespread adoption. Canada - Canada has swiftly moved to ask all businesses and investments to register their respective firms under the FinTRAC as their activities would be monitored by the body to check fraud and money laundering. The new crypto law according to FinTRAC is that all transactions that are more than $7,000 should be duly noted. The sending and receiving party should be identified and failure to do so would attract severe charges. The new law has given investors a huge relief in terms of eliminating fears of fraud. Mexico - Mexico enacted a new law to guide crypto in March 2018 but was met with resistance across the country. The new law states that cryptocurrencies were illegal but could be used as a means of payment across the country. The new law states specifically that Banxico, the country's central bank should monitor all crypto activities and would report all unauthorized transactions whilst handing out fines to businesses that fail to adhere to the instructions. The major boost is that crypto businesses have not been levied with a clear tax system as regards digital assets. United kingdom - Ever since the wide adoption of crypto around the world, the United kingdom has always measured the activities of crypto exchanges across the country. Even though the government has refused to see digital assets as a means of legal tender, they have moved swiftly to enforce a registration with the FCA amongst the exchanges in the country. With no ground laws in place to monitor the activities of the exchange, the country has levied the capital gains tax on individuals and investments dealing in cryptocurrencies. Colombia - Colombia has one of the worst rules and regulations when it comes to crypto adoption. Presently, the country lacks a legal framework when it comes to regulating crypto. With the country witnessing a 61% growth in terms of FinTech companies despite the seemingly unregulated activities of crypto exchanges in the country. With the Colombian law failing to recognize cryptocurrency trading as a legal investment, most of the exchanges in the country are always subject to losing their services for handling of illegal transactions. India - India recently passed a bill into law that said that banks can now work with crypto exchanges in the country. This development comes after the legality of crypto exchanges and the laws that govern them were called into questions after the Supreme Court permitted them to carry out their activities in the country. Presently, the trading of crypto in the Asian country is legal and has seen so many adoptions even before the court ruled in its favor. With a legal framework scheduled to be drafted in the coming weeks, only time will tell if it would favor more adoption. Pakistan - Pakistan issued a blanket ban on crypto investments across the country in 2019 but has soon suspended the ban and asked all crypto exchanges and service providers to register their business with the state bank of Pakistan. The country executives are presently going into a meeting to discuss how the legal frameworks for the adoption of crypto would be in the country. Despite the ban that was effective since last year, the majority of the Pakistan population has owned cryptos in other countries but can now comfortably trade in their own country.
Thanks for the taxes. We don't give a fuck about your business
This is an all-too-familiar sentiment from government to Canada's startup (specifically bitcoin-startup) community. On March 27th, 2020 the Prime Minister proudly announced a $40,000 government backed loan. "For small businesses, there's a $40,000 loan of which $10,000 will not have to be repaid if they meet certain conditions. There are many things we're doing out there with low interest or no interest loans to help businesses get through this, but the wage subsidy and the Canada Emergency Response Benefit for people who lose their jobs are going to be there to make sure that we come through this strongly." ref Prime Minister Justin Trudeau holds a news conference while in self-isolation at Rideau Cottage in Ottawa Friday, March 13, 2020. (Fred Chartrand/The Canadian Press) I, like many small business owners, let out a sigh of relief as we have all seen revenues vanish over the previous weeks following the necessary public health measures put into place. That $40,000 meant one more payroll run. Maybe it made up for the payables or rent that was coming due in 4 days. A $40,000 injection of "worry-about-it-later" money would mean breathing room. The equivalent of a pool noodle while wading in the middle of the ocean. Enough to keep you thinking "you can do this". Banking is hard to come by as a bitcoin/fintech startup. We are not "welcomed into the traditional banking atmosphere with open arms" regardless of our balance sheets or longevity. Even the bank for Alberta's Entrepreneurs (which promotes their "blockchain friendliness") refuses to work with businesses that touch cryptocurrency. Hi Adam - hope all is well. What is wrong with the markets and BTC as a safe haven ? You did mention a few months ago that we will see sub $6k soon and I wasn't sure how … well you were right. You are an Oracle. Regarding banking - When me and [redacted ATB employee] met you, we extended the offer to help out and support your retail banking needs. You decided not to take it. I just heard back from our Compliance team that their Pause extends to all retail accounts as well. Basically, anything that touches crypto / even personal accounts is not supported right now. Unfortunately, I can't help and I am sorry. Hopefully, if the markets turn positive / and pause is lifted / I can try to seek support for your retail and business needs. For now, it is a full stop. I am also moving to a new role at ATB this week and not sure who would manage the crypto portfolio. I will keep you looped in. best, [redacted ATB employee] So forget ATB, I thought SURELY the Business Development Bank of Canada (BDC) would be there to lend a helping hand during this unprecedented economic and health crisis. The fact that our revenue dropped nearly 70% week-over-week with the onset of the pandemic, and the fact that I have paid well into the six figures in provincial and federal taxes last year would mean that, during these hard times, Canada's Small and Medium Sized Business savior wouldn't be as prejudiced. I was wrong. One week after my application went unanswered I was put in touch with a rep through a personal connection of mine. Within minutes a chipper response pinged my inbox: Hi Adam Happy to try and help you. Can you send 2 years of Financial statements to me and: How much do you need? What are your revenue expectations during and after the crisis - do you have a budget and cashflow projections? What would be your ball park cash burn rate per month for the next few months/ Thanks - when I get these I will see if it will be me or another colleague that will be able to help and then we will reach out to arrange a zoom chat. Best, Moments later, before I could prepare the info, he followed up (even threw in an emoji) Hi Again - more info below Best This is the latest from CRA and all the links you'll need to understand and apply😊 https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html#h2 https://www.bakertilly.ca/en/btc/publications/taxflash-temporary-wage-subsidy-for-employers https://www.taxtemplates.ca/wage-subsidy/ I thought we had it. I thought my country 🇨🇦 was coming to my rescue to help me and my 11-person locally-employed team pay the bills for a few more weeks. Until I received a third follow up… Hi Adam I just reached out to our Tech Finance Manager and unfortunately we are unable to Bitcoin clients as our board has deemed them ineligible due to potential money laundering. I am very sorry - this is news to me. Being a Crown Corp we have very strict rules. I think you can still access some Federal support though via some of the links I sent earlier. Best Wishes to you and yours, Potential. Money. Laundering. You'll notice he does not ask for my documentation (FINTRAC Registration as a Money Services Business) which should be the first step to verifying that our business goes above and beyond to prevent the money laundering that they claim to be concerned about. Despite sending him our industry-leading policies and FINTRAC Registration the final response was polite but stern: Morning - Thx for the info. Policy such as this are from the Board of Dir's and Minister of Industry. But things change - I now have hemp clients. It will take time though. When we get to the other side, I would love to have a beer with you and [redacted personal connection name] and learn more about your biz and future. I personally believe crypto will be a important solution in rebuilding the world economy. Best, And that was apparently that. However, you don't get to be one of Canada's leading Bitcoin ATM companies without a little bit of grit and resilience. So I tried again through conventional channels. This time the response was just as useless but even more robotic (you'll notice they spelled my last name wrong…) Dear Mr. O`Brian, Thank you for submitting a request for financing. After examination of your application, we regret to inform you that BDC is not able to provide financing for your business. We understand how deeply the COVID-19 situation is affecting. However, we are unable to respond positively to your request that does not meet the eligibility criteria. An evolving situation As the COVID-19 situation continues to evolve, BDC's response is evolving as well and we are working closely with government, financial institutions and our partners. Ensure that you have spoken to your primary financial institution to see if they are able to help with financing: As you may know, additional measures to support entrepreneurs have been announced by the Government of Canada, including anew Canada Emergency Business Account as well as a SME Loan and Guarantee Program. As these programs are not administered by BDC, your primary financial institution is best suited to assess if you may benefit from these relief measures as they get deployed shortly. For the latest updates by the Government of Canada on COVID-19, visit Resources for Canadian businesses: COVID-19. Thank you, This response left me frustrated. How could it not? How could our small, innovative, and incredibly compliant business not be within the "guidelines" set out by Mr Trudeau last week? My response was heated: This is extremely frustrating. The fact that I am denied help, despite paying 100s of thousands in taxes, is discouraging. Why do you take my tax money, but then deny my eligibility based on "crown rules". The eligibility criteria of BDC should be companies that are striving to employ local workers with cutting edge business practices and revolutionizing the world. All of which we do (and have been doing for 7 years) I know you will cite "compliance", and yet refuse to look at my compliance manual. A policy that was written by a previous compliance officer from a schedule 1 "big 5" bank. A policy that has been approved by 2 third party auditors. A policy finalized by my Chief Compliance Officer with 10+ years as a compliance master who has prevented millions of dollars worth of fraud AND played a key role investigating. It is disappointing to see you promoting the narrative that you are "for entrepreneurs" when in fact I have found it to be quite the opposite. We are a licensed money service business and I personally spend my time working with local authorities educating them how to prevent fraud within this space. Yet somehow I've been labeled "ineligible" for assistance when I really need it. What is the point of innovating? Is "the first guy through the wall gets the bloodiest" really the narrative you support? "Don't think outside the box because we don't like that?" The prejudice of the BDC towards alternative financial companies is disappointing to say the least. I would appreciate your response, though if past experience has taught me anything I know better than to expect one. Perhaps the Canadian business environment is not one that is as friendly as you promote. Stay healthy, Adam As you might have guessed this went unanswered (though the robots did manage to regurgitate the exact same original message) and here we are. My initial sentiment from the most recent response to the BDC remain. What is the point of innovating? Why do I spend tens of thousands of dollars every single year to ensure that our compliance is industry-leading? Why do I spend hours and hours working (for free) with local authorities to educate them about Bitcoin and how to prevent fraud? Why do I stretch my hand out so far only to have it slapped when I am looking for the same support everyone else is getting? I've endured years of prejudice from the traditional banking industry. I've built an incredibly successful business that exclusively employs local labour even though it would be all too "easy" to off-shore the work. We've paid our taxes, donated to the community all without the help of the bank's lending products, but being denied support relief during this unprecedented crisi due to "potential money laundering" is as prejudicial as it gets. All of this to ask, Mr. Morneau, will these subsidies affect my taxes? I understand the economic cash injection. As a whole, I am onboard with the injection to help stimulate the economy. But we all know who will end up paying for it. We all know that money doesn't grow on trees (it's printed dummy) and that it will eventually have to be paid back in some capacity… which will eventually be through increased taxes. Taxes that hard-working citizens continue to pay every year. If only you knew how much you were contributing to Bitcoin's adoption… Finally, dear reader, I beg you to think. Listen to my story and ask yourself "is my industry next?" "Can I trust them with my taxes… can I trust them with my money?" I fully believe what I am experiencing is a direct extension of the reason Bitcoin was created. Bitcoin exists to give its owners choice. A choice that doesn't exist with fiat money, printed at will by a centralized body of power. Right now the majority of "industry" is getting help, the government is listening to their people. I am unfortunately in the minority. My business is too edgy. My business is too "risky". My business doesn't deserve help. Will your industry, your business, your pension, your family be next? Adam | www.bitcoinsolutions.ca
05-22 04:09 - 'Havent heard of Newton. But I recently got into cryptos and researched some options. [[link]] has been really good so far i made a couple of $100 deposits I have a bit of Bitcoin and Ethereum. / It's easy to use, keeps detai...' by /u/SoloTheFord removed from /r/Bitcoin within 2-12min
''' Havent heard of Newton. But I recently got into cryptos and researched some options. [[link]2 has been really good so far i made a couple of $100 deposits I have a bit of Bitcoin and Ethereum. It's easy to use, keeps detailed transactions for export on taxes, small fees. 95% cold storage and 2FA security via google or a code texted directly to your phone every-time you login. It seems really secure and is highly rated. If you use or share a referral code they deposit $20 into your account at the beginning of the next month if make a buy of at least $100 .(DM me if you sign up I will send you a referral.) Also: Very fast deposits they take etransfers and its maybe taken a couple hours at most for me. fully regulated by Canadian federal authorities through their registration with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a Money Services Business (MSB). ''' Context Link Go1dfish undelete link unreddit undelete link Author: SoloTheFord 1: bi**uy.ca/ 2: *itbuy*ca*]^*1 Unknown links are censored to prevent spreading illicit content.
With bitcoin under supervision, can Canada become a “purified land” for cryptocurrencies?
The United States is still unregulated and has great uncertainty about the Bitcoin and cryptocurrency markets, but Canada, which is also a North American country, has embraced Bitcoin first. The cryptocurrency will be fully legalized from June. https://preview.redd.it/5l7qkoewp0351.jpg?width=696&format=pjpg&auto=webp&s=1f774966845275a040226adcd240f9f0a18d9795 Canada’s new law came into effect in June. Cryptocurrency exchanges and cryptocurrency payment operators are classified as institutions that provide financial services. Cryptocurrencies begin legalization procedures in Canada. The emergence of the new bill means that the requirements of cryptocurrency organizations are strict and standardized. Crypto companies in Canada must send all information about cryptocurrency customer transactions to Canadian authorities and register with the Canadian Financial Intelligence Unit FINTRAC (Canadian Financial Transaction and Report Analysis Center). Transactions over CAD 10,000 (approximately USD 7410) need to be declared. The law has caused heated debate in Canada. Francis Puglier, the head of the local cryptocurrency exchange BullBitcoin, tweeted: “Today is my last day as an unregulated virtual currency trader. From June 1, 2020 , Canada’s currency services business has officially regulated bitcoin exchanges and payment processors.” https://preview.redd.it/l18thbryp0351.png?width=619&format=png&auto=webp&s=391d49770c09756e32af857e5940905c5b3730b1 (The following is part of the regulations, you can skip to see the conclusion) According to the requirements of the new law, individuals or entities that are trying to trade need to provide addresses, emails, telephones, aliases, dates of birth, citizenship, ID numbers, social security numbers, etc. Entities must provide additional entity registration or establishment dates, which are registered or established The number and its jurisdiction and country of issue. Canada named this Act “Regulations Amending Certain Regulations Made Under the Proceeds of Crime (MoneyLaundering) and Terrorist Financing Act, 2019: SO2019–240” Regulations of certain regulations: SO2019–240). All persons or entities conducting cryptocurrency transactions need to provide a large amount of personal information and transaction information. It is worth mentioning that the transaction information includes the transaction address (receive and send), the source, is it completed? If unsuccessful, why? https://preview.redd.it/p9ti0qa1q0351.png?width=972&format=png&auto=webp&s=29932692dda2a901ade69468fbcc4576494657b2 The bill basically treats all transactions as pre-money laundering. Once money laundering is found, it basically locks all the information of the trader. If there is no information, the exchange will be backed and there will always be someone responsible. Canadian regulation is not weaker than Japan. In 2017–2019, which was crazy and lenient, the laws issued by various countries in 2020 were generally strict, reflecting that cryptocurrency transactions have gone through a chaotic early period, and then entered a strict period of order. Many of them are uncertain, Russia, India, and the United States, while others are open and supportive, Iran. Cryptocurrencies are not conducive to state management. Countries that support or have planned development are generally in the third world, and are more subject to pressure and sanctions by major powers. https://preview.redd.it/ox84hki3q0351.jpg?width=424&format=pjpg&auto=webp&s=e3854420bdf07f00b8dd599193cf68daf1b58e3a
Happy Halloween! Audit Statuses of Canadian Cryptocurrency Exchanges
Halloween is a wonderful time of year! Businesses and consumers alike dress up, children go door to door naively asking strangers for candy, and everyone parties celebrating things like death and evil. In the spirit of Halloween storytelling, let me tell you a scary story. There once was a Canadian cryptocurrency exchange. It had one of the simplest user interfaces, the CEO was well known in person and trusted throughout the country for over half a decade, and it had several deposit and withdrawal methods. It was the first to register as a money services business and for much of its history, it was one of the most legally compliant exchanges. It even looked to be headed for public listing on the TSX. The exchange operated for 6 years, assuring users that all funds “are stored in cold storage, using some of the most secure cryptographic procedures possible.” Unfortunately, while we celebrate Halloween by dressing up and wearing masks once a year, the wonderful people who brought us this exchange played “dress up” for over half a decade and time will only tell if there are any more “masks” to come off in this story. There’s no better or more fitting time to explore one of the darkest realities of the Canadian cryptocurrency space - exactly what is backing any of the cryptocurrency on Canadian exchanges. It’s easy to lose sight that there are real people behind these funds. Most people spend most waking hours working for their money. It literally is their lives. Impacts to victims are not just financial, but psychological and social as well. Victims of exchange fraud go through depression, anxiety, and trauma. They lose their trust and faith in humanity. They withdraw from friends and family in shame and humility. In the spirit of exploring dark and evil things, let’s examine exactly what evidence there is that any of your crypto is backed on any Canadian exchange. This is a continuation of research I’ve been working on since May/June. I hope it will be enlightening and help you better protect your funds that you worked hard for. I’ve done a detailed analysis of all Canadian exchanges I could find that handle any sort of custody of funds, and grouped them into 3 categories:
Not Audited. The only assurance I was able to find that any crypto on the exchange is backed are their words. I was unable to locate any public audit or report of an audit.
Audited. This means that at some point in the past, the exchange invited someone with a reasonable level of credibility, who they showed the wallets to. This person/group, at that point, was sufficiently convinced that funds were actually held by the exchange.
Proof of Reserves. An advanced real time public audit algorithm. It shows that funds exist right on the blockchain, validates access to those funds, and uses a hash tree to enable any customer to verify that their balance is included in the total.
Non-Audited Exchanges (“trust us, we haven't spent your money, we promise")
Bitvo - The service “utilizes a proprietary cold storage solution”. Proprietary, as in, definitely better than established non-proprietary solutions. If you can’t withdraw, they “will credit your account for [their] withdrawal fee”. They’re not an MSB that I could find, nor are they audited. Coinfield - MSB. No audit. Luckily it’s the "most secure trading platform in Canada" - though apparently not the other 150+ countries, including Estonia where they’re based. No matter which country you pick, the “Security” page still says "most secure trading platform in Canada". Coinsmart - MSB. Not sure what "[i]ndustry leading cold storage" is, but luckily they’re so "accountable to [their] clients, community and to each other" and "committed to being open and honest" that they don’t need any audit. Coinut - MSB. Also "the most secure cryptocurrency exchange platform". In addition to not using multi-sig and "not us[ing] USB drives, as the online computer may be infected with virus", they also don’t use audits. Einstein - You can get “your money deposited and withdrawn faster than any other exchange”. As one customer said "With so many hacks and exit scams, it gives me confidence knowing Einstein is backed by hard-working people just like me." Just check the user experience on their subreddit from their "220,000+ satisfied customers". EZ-BTC - As they said, “All your coins are kept in cold storage. They’re safe.” They have “strong security”. The supposed presence of physical ATMs was one of the strategies to build customer confidence and they promised 9% annual return on stored funds. NDAX - MSB. Luckily also “Canada’s most secure trading platform” with "fast withdrawals". I couldn’t find any audit but at least there’s a full page risk disclosure and disclaimer. You can sleep peacefully knowing that they’re legally protected. Netcoins - MSB. The best assurance I could find of solvency is that they “can process large transactions”. Although they don’t waste time with audits or links at the bottom of their website, apparently “[a]ll transactions happen quickly and securely” “within the same day”. Newton - MSB. “No-fees”! Your funds are stored in the "professional custody" of Balance, which doesn’t appear to be a registered MSB. I couldn't find any audit of the funds but they "audit [their] policies and controls". They "publish the reports", but I couldn't find any reports. Simply storing funds somewhere else doesn’t give any assurance they cover customer balances. QuadrigaCX - Operated since 2013, with “vast cryptocurrency reserves” right up to the end. "Bitcoins that are funded in QuadrigaCX are stored in cold storage, using some of the most secure cryptographic procedures possible." Their "cryptographic" procedures are so secure that nobody can access any funds, even now! Shakepay - MSB. Many will trust the raccoon mascot promising “commission-free” trading. No audit found but the “majority of all digital assets on Shakepay are stored securely offline”. Whatever this means, it’s good to know that up to half might not be.
Audited Exchanges ("so and so swears we didn't spend your money, you can trust them, we showed them once before")
Overall assessment: Bitbuy has a long history of buying/selling bitcoin without custody, and is likely too new to offering custody to have been hacked yet. The fact they have taken proactive steps shows promise.
According to the site, they "undergo annual 3rd party financial statement audits", but don’t mention by whom. According to “Newswire”, it’s a firm called MNP LLP.
I was unable to find any published report on the audit, which was completed prior to January 17th, 2019.
Overall assessment: It’s hard not to be a fan of Medium articles describing proactive steps that a company is taking, however without an actual report it can be difficult to assess the integrity of the reserves.
No audit is mentioned on their website, however multiple news sources report that one occurred. According to TechVibes, the audit was completed "by a national accounting firm whose identity is protected under an NDA", which is the best I was able to ascertain from several news sources.
A report about the audit was found as early as September 27th, 2018. TechVibes indicates "the audit covered the operational years of 2015, 2016 and 2017 for Coinsquare, and concluded an “unmodified opinion,” which means the financial statements from those years are “free from material misinformation.”" Other articles had even less information, and I was unable to find any published report.
Overall assessment: The fact that an audit was completed is a great step in the right direction, however the fact the firm is undisclosed by NDA, the audit is completely unmentioned on their website, and minimal details are available should be concerning. It also may be concerning that they claim to be "[t]he most secure trading platform" and also "100% proprietary". This would imply the team at Coinsquare is smarter than established security standards by experts all around the world at protecting your funds, contradicting recently reported incidents.
Kraken - Not a registered MSB in Canada (that I could find)
“So and so” is Stephan Thomas, CTO of Ripple.
The page literally says the audit was done "over the past several weeks", and since the page doesn’t have any date you might assume it’s recent. But look closely at the screenshot and you’ll see a date in 2014! Yes, that’s 5 years ago!
Overall assessment: While it certainly feels good to know an audit was done, the opinion of one individual from 5 years ago doesn’t say much about the state of anything today and they openly admit all kinds of limitations.
Proof of Reserves ("here's your money, right here right now on the blockchain, and here's a proof that we included your balance in that total")
Rather than depend on outdated audits (or lack thereof), it’s actually possible to use the blockchain and cryptography to enable a public real-time audit. This can give assurance to every customer that their balances are fully backed. Giving everyone the ability to check the integrity of balances will keep us all safer. It immediately exposes any fraud, and in most major hacking cases there was advanced hacking that went unnoticed ranging from months (Bitgrail), or years (Mt. Gox). Having an aware public reduces the number of people trading on fraudulent exchanges, and can pressure the exchange to shut down trading or resolve the hack faster, so less funds are permanently lost. To help explain exactly what this is and how it works, I’ve started a detailed tutorial. I did not come up with this algorithm - it was created in 2014 by a guy named Gregory Maxwell. Sometimes cryptography can be hard to understand. Hopefully this tutorial is simple:
Given what can often be at stake, I had hoped that maybe one of the “audited” exchanges might embrace Proof of Reserves. Sadly I haven’t had any such luck. Bitbuy:
Actually they reached out to me in response to one of my posts on Reddit July 14th, asking for detailed feedback on their services.
I provided an extensive summary of my research (I’d just put together descriptions of every exchange for a business plan.)
As of today, that response, which included Proof of Reserves among a multitude of other suggestions, is still unanswered.
On the 4th of July I actually got a response from them to a casual mention where I was recommending their exchange (based on the Medium articles).
Their response, which didn’t address the Proof of Reserves, included the statement “All coins on our platform are 100% secured offline in cold storage“. On their site, Coinberry shows 15 minute withdrawal times in one of the screenshots. Perhaps they have a team standing around “offline” and ready to service withdrawals 24/7.
My subsequent response to them was not answered.
On their website they expressly give reasons why they don’t want "public knowledge of exchanges’ or wallet providers’ bitcoin wallets and total holdings".
They claim it has an effect on security, however public keys do not enable any access to funds - only private keys can. One would hope that their security of funds doesn’t depend on not knowing which wallets they own, since the blockchain is pretty public.
They also claim an effect on user privacy, which is important. Nobody should have any illusion that transactions to or from an exchange are secret in any way. I would highly recommend using privacy coins and setting up new wallets regularly, given that transactions are completely public on the blockchain already.
I was unable to get any clarification, either in live chat or multiple Reddit posts. Understandable, given the size of their operation.
Given that this was their stance after Mt. Gox, it seems unlikely to change based on recent events half a decade later affecting a much smaller exchange.
As such, the bottom line is that present exchanges don’t want to share public keys and offer the kind of transparency which is necessary to enable customers to know their funds are backed. Attempting to get answers doesn’t reveal them, and I’m left with an unnerving silence not unlike the end of Halloween night, like I’m asking questions nobody should ask. Having spent the last 8 months of my life watching and being part of a large group of people suffer through a grueling bankruptcy, where we’ll be “lucky” to only lose 90% of our funds, I want this fixed. I don’t want to live in a reality where fraud can happen just buying/selling on the largest and most trusted exchanges. Especially now that I’ve learned blockchain provides the capability for even greater transparency and a level of public audit far beyond even what's possible with fiat. If you feel the same way, I invite you to join Quadriga Initiative, where we are fighting for a Proof of Reserves future and also enabling businesses to help Quadriga victims with an innovative token recovery project. Every sign-up helps us reach our goal and launch the project! If any information in this post is incorrect, please let me know so I can fix it! Thanks! I’m happy to update the audit status of any exchange given reasonable evidence, or provide a review of any other custodial exchange I might have missed.
This is a compilation of everything suspicious I found with Quadriga. Please let me know if there’s anything incorrect or missing Early History (2013-2017)
QuadrigaCX started in 2013 and made history by being the first crypto exchange to register with FINTRAC and accept gold bullion deposits. By 2015, Quadriga became Canada’s largest crypto exchange. So far, so good.
In March 2015, Quadriga attempted to go public and a month later, announced its intention to install Bitcoin ATMs across Canada. Both these plans were eventually aborted.
Even though Quadriga never listed, it started selling its shares over-the-counter. In Sep 2015, Quadriga stopped publishing audits. In March 2016, Quadriga was banned from selling shares after the BCSC issued a cease trade order (CTO) for not submitting an audit.
Around the same time, 3 of Quadriga’s 5 directors (Anthony Milewski, Lovie Horner, Bill Filtness) and CFO (Natasha Tsai) all resigned. Sometime in 2016, Director and Co-founder Michael Patryn resigned. This left Gerald Cotten ("Gerry") as the only remaining director.
Evidence shows that Michael Patryn has used several aliases (including Omar Dhanani) and is a convicted identity thief
Quadriga has changed its business address several times. It started as a Vancouver-based exchange, with its addresses changing from Commercial Dr, Nelson St, and Homer St. Eventually, the address moved to Toronto. None of these were physical office addresses, but instead a mail forwarding address.
The Terms of Service on Quadriga’s website have always suspiciously stated that:
All account fundings are considered to be purchases of QuadrigaCX Bucks. These are units that are used for the purposes of purchasing Bitcoin or other cryptocurrencies. QuadrigaCX Bucks are NOT Canadian Dollars. Any notation of $, CAD, or USD refers to an equivalent unit in QuadrigaCX Bucks, which exist for the sole purpose of buying and selling Bitcoin and other cryptocurrencies. QuadrigaCX is NOT a financial institution, bank, credit union, trust, or deposit business. We DO NOT take Deposits. We exist solely for the purposes of buying and selling cryptocurrencies.
Banking troubles throughout 2018
In late Dec 2017, Jose Reyes (CEO of Billerfy and Costodian Inc, Quadriga’s payment processor) moved over a million dollars from Quadriga’s account and into his own personal CIBC account
Shortly after, CIBC froze these funds and tried reaching out to Gerry, who refused to speak with them
All throughout 2018, Quadriga’s fiat withdrawal times took 2-3 months to complete. Quadriga kept citing the CIBC freeze as the reason. What’s very suspicious is how Quadriga constantly lied to customers with promises such as “the withdrawal backlog will be cleared in 1 week” or “your funds have been processed” when in fact they were months away from doing so.
Period leading up to Gerry’s death
On Nov 27, Gerry filed his will just 12 days before his death. He left a plane, two houses, and $100,000 for the care of his two Chihuahuas.
Gerry had a plan for all his personal affairs in the event of his death but he had no contingency plan for $180M CAD of crypto in cold storage that only he had the private keys to?
India is a suspicious place to travel, considering Gerry had a medical condition and considering how easy it is to get a death certificate there
After a severe bear market, most crypto businesses have been struggling and laying off staff. It’s odd that Gerry, who has no history of philanthropy, chooses to donate money. Especially when his exchange is having so many banking troubles.
The organization that built the orphanage states on their website that they take care of all construction. There was zero need for Gerry to go to India
A reddit post shows that the orphanage exists, although it’s a mystery where the image came from
Bitcoin fell 50% in Nov – the worst monthly decline in 7 years. Gerry’s death occurred shortly after
Gerry’s death and announcement
On Dec 9, Gerry died in India “due to complications of Crohn’s disease.” However, there is a low probability that Crohn’s disease is fatal, especially at the young age of 30
Just a couple days later, a reddit post indicated someone bought 300 BTC on Quadriga at a 25% premium and moved the funds out of the exchange
It took Quadriga over a month to announce Gerry’s death on Jan 14th.
Over the following 2 weeks, Quadriga continued to assure customers that “our hot wallets are being filled and withdrawals are going slower but will complete.”
On Jan 28th, Quadriga takes down their website. Initially they said “an upgrade is being performed,” then the message changed to “site maintenance” before being changed to “Quadriga has filed for creditor protection” on Jan 31st.
In the media, Gerry stated several times that Quadriga uses multi-sig cold storage. This is where 2/3 or 3/5 people can be used to authorize a transaction. Clearly no multisig was used if only Gerry had the private keys.
Formal Active Investigations
A preliminary court hearing was held on Feb 5, 2019 where the Canadian Apex Court appointed Ernst and Young (EY) as Monitor to further investigate into the matter. EY has stated that its an extraordinary challenge to decipher Quadriga's finances, as the company has no accounting records (and did not systematically track incoming and outgoing payments) nor a bank account in its name.
The Better Business Bureau (BBB), which gives Quadriga an F-rating, launched an investigation in Dec 2018
Quadriga has substantial personal information on its customers, including SIN, driver's license, and banking details. Given Quadriga's murky history, customers may have their identity at risk and should setup up credit report and identity theft alerts with either Equifax or TransUnion.
CoinTrader.net: Canada's Last Bitcoin-Friendly Bank Closes Accounts Nationwide
Full post: https://www.cointrader.net/news "we were informed this morning by our bank that the last remaining Bitcoin-friendly charter bank, Bank of Montreal, is closing all Bitcoin-related business accounts across Canada. Despite the fact that Cointrader has already implemented an anti-money laundering regime to comply with potential FINTRAC regulations which was vetted by BMO itself, the bank has decided to sever our account as well. These actions were taken immediately following the remarks made last week and without any other provocation or evidence of wrongdoing."
As many of our users are aware, we have faced a variety of payment processing and banking issues over the past few months as the banks in Canada have cracked down on Bitcoin and cryptocurrency usage. While the reasons for the Canadian banking system attacking cryptocurrency are unknown, there has been a clear attack on the industry by all of Canada’s big five banks. This has forced us to change some of our payment processing procedures. While the attacks of the banks have primarily impacted the ability for Canadians to transmit funds to purchase cryptocurrency, it has also impacted internal transfers within companies as well as outgoing transfers from exchanges across the country. As the largest exchange in Canada, we have been particularly targeted by the banks. To help address these issues, we have established a number of new payment processing partnerships that will enhance the the experience for our users. Please note that effective immediately: - EFT payments will be limited to $10,000 per payment. This allows our payment processing partners to better comply with FINTRAC legislation. - Any payment larger than $10,000 must be submitted as a wire withdrawal. Thank you for your understanding as we work to improve access to cryptocurrency for all Canadians.
CoinField’s statement on the recent chain of events caused by QuadrigaCX affecting Canadian traders
This is a disappointing time for the Canadian cryptocurrency industry, and one that we feel at CoinField isn’t a true representation of the people or businesses in it. However, this unnerving incident has brought to light an important conversation that Canadians and cryptocurrency HODLers around the globe should discuss — the topic of regulation. At CoinField, we believe that without regulatory guidelines, legitimate businesses and the rights of consumers are not protected. Instead, it opens up the environment to corruption and nefarious activities. CoinField Security The history of Bitcoin is littered with exchange hacks and scams. At CoinField, we wanted to set a new standard. We believe in cryptocurrency and the opportunity it provides newcomers to participate in building capital and communities that were traditionally left out in the cold. That’s why providing cryptocurrency access to 100 countries worldwide and securely storing our users’ assets is our top priority. At CoinField, we store a majority of our assets in cold storage. Only to meet our daily trading supply, do we keep a limited amount in warm wallets. To us, storing a majority of assets in cold storage offline is the most secure option we can offer as an exchange. In most cases, exchanges are hacked because assets were stored in hot wallets online. As a company, choosing our cold wallet and custodial service partner was one of the most important decisions we made. Confidently we can say we chose the best in the biz, Bitgo. Bitgo is a global leader in institutional cryptocurrency financial services, including cold wallet custodial storage. They provide institutional level security as well as multi-signature wallets. Multi-signature wallets protect users against unforeseen events like the death of the founders at CoinField. Another security feature we offer is storing all our users’ data in an isolated network of servers. Thoughts on Regulation Although Canadians may feel disheartened by recent events, we wanted to take this time to highlight the need for regulation in this industry. When an industry is in its nascent stages, it is favourable for there to be little or no regulation. It allows innovators and developers to test and create without restrictions and barriers. However, in Bitcoin’s 10th year, it’s time to put some guidelines in place. At CoinField, we applaud the start of an important dialog on the regulation of cryptocurrency exchanges. We believe that all exchanges need to be audited annually, just as traditional financial institutions are required to do. Regulation helps the growth of legitimate businesses and protects the rights of consumers. We support the provincial and federal governments of Canada in their endeavor to regulate the cryptocurrency exchange market. Here at CoinField, we are in compliance with Fintrac regulations and we have an in-house compliance team led by a chief compliance officer who is dedicated to combating all fraudulent activity. In addition, we employ someone who audits all withdrawals from our exchange. Market Position CoinField is a Canadian Cryptocurrency Platform based in Vancouver, BC, founded by local technology veterans and entrepreneurs Babak Bob Ras and Reza Bashash. We have a team of 30+ experts located in the World Trade Centre in downtown Vancouver, Canada and we’re actively seeking talent to join us on our journey. CoinField launched in April 2018 in midst of the cryptocurrency market crisis. Users came to CoinField solely on the reputation of the platform and the word of mouth by satisfied users. In November 2018, we launched the service globally, offering access to crypto trading in 100 countries, achieving 100% user growth in a months time. This month, we are launching our White Label Cryptocurrency Trading Software. Prior to the commercial launch, the team spent a year creating and building the one-of-a-kind crypto trading platform. The all-in-one platform offers better performance, customization, and liquidity than our competitors. After the successful launch of CoinField, we are confident that financial institutions that want to build a digital assets exchange in their own country will want to take advantage of our software licensing program. As a young company in a young industry, we know that there will be challenges. The market is volatile, it needs a regulatory framework, and identity fraud is a constant threat. However, we know that to build a sustainable ecosystem built on complex cryptographic functions, the industry needs to prioritize education. In the next few months, we’ll be launching a Daily Live News outlet covering all things crypto from market updates to industry news. Lastly, since our world is heading in a mobile-oriented direction, we’re building a trading app for on the go. We are here for the long run. We want to build a sustainable business, using the latest technology to enable access to financial services and improve the quality of life for everyone.
In December of 2018 BBB began an investigation into the business practices of QuadrigaCX. This investigation was prompted by the number complaints alleging that their currency exchanges from virtual currency to Canadian Dollars were not being completed in the advertised time frame. Our investigation uncovered a lawsuit ( click here ) which disclosed that approximately 26 million dollars were frozen by the financial institution where the accounts were held. This suit also states that these funds were traced to transactions by 388 Depositors. On November 9, 2018 the frozen funds were ordered to be deposited with courts for determination as to entitlement of the disputed funds. Some of the transactional behaviour described in the suit is not typical of currency exchange. The suit indicates that a third party processor used a personal bank account to deposit money that was intended to fund currency exchanges on behalf of QuadrigaCX and QuadrigaCX clients. Currency exchange in Canada is regulated. Currency exchange transactions are required to proceed through bank accounts that are associated with Financial Institutions or Money Service Businesses rather than personal accounts. Financial Institutions & Money Service Businesses are regulated business types, with legal reporting requirements. Money Service Businesses are required to register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) At this time in Canada, virtual currency (aka crypto currency) exchanges are not required to register as a Money Service Business. BBB verified this on December 5, 2018 with FINTRAC. When an individual purchases crypto currency with QuadrigaCX they are engaging in currency exchange. The purchase of currency is currency exchange. Purchasing Bitcoin (BTC) with Canadian Dollars (CAD) is changing one currency to another. According to the QuadrigaCX website, a person first purchases QuadrigaCX bucks, those QuadrigaCX bucks are then used to purchase the desired currency. Typical transactions are CAD or USD used to purchase QuadrigaCX bucks, which is then used to purchase the crypto currency of choice, and the reverse. QuadrigaCX bucks may not have value outside of the QuadrigaCX platform. This means that if QuadrigaCX ceases operations it may not be possible to redeem the value of those QuadrigaCX bucks. QuadrigaCX does not provide information on what happens to QuadrigaCX bucks during transactions that have not completed. On December 10, 2018 BBB sent an email to [[email protected]](mailto:[email protected]) requesting information relating to the information discovered during the course of our investigation. As of January 7, 2019 BBB has not received a response. These were the questions asked by BBB: 1. Does QuadrigaCX have a storefront? If yes, what is that address? 2. If a client has an issue to what address should they send any legal correspondence? 3. Who is your current payment processor(s), are they operating from a fully transparent business account? 4. A Financial Institution froze ~ 26 million of client funds in an account in 2018, these were recently ordered to be released, why have there been delays in the transfer of funds to other clients? 5. Complaints to BBB indicates that delays well beyond the stated deposit time-frames have occurred with no explanation to those clients. Can you clarify why the delays occurred? 6. Where does QuadrigaCX disclose what happens to QuadrigaCX Bucks if QuadrigaCX closes or ceases operations. These are purchased by clients to fund purchases of other currencies. If they remain in an account because of processing delays or business or account closure how are clients refunded? Are they refunded the original purchase price of the QuadrigaCX Bucks or the market value, and in which currency, fiat or crypto? Should BBB receive a response the business review will be updated with a summary of the information received.
On January 31, 2019 QuadrigaCX declared that they ave made an application for creditor protection. Clients who believe they are owned money may find the information contained on the Office of the Superintendent of Bankruptcy of Canada's website about the Companies' Creditors Arrangement Act (CCAA) useful. That information can be read at https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02284.html The following is the statement posted on QuadrigaCX's website, https://www.quadrigacx.com/ January 31, 2019 Dear Customers, An application for creditor protection in accordance with the Companies' Creditors Arrangement Act (CCAA) was filed today in the Nova Scotia Supreme Court to allow us the opportunity to address the significant financial issues that have affected our ability to serve our customers. The Court is being asked at a preliminary hearing on Tuesday February 5 to appoint a monitor, Ernst & Young Inc., as an independent third party to oversee these proceedings. For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful. Further updates will be issued after the hearing. https://www.bbb.org/ca/bc/vancouveprofile/currency-exchange/quadrigacx-0037-1281832/details#BBB-Investigation-Results
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