Some Canadian Bitcoin exchanges have reportedly received letters from financial regulators reassuring them they do not have to follow the detailed rules required by US regulators, and used recently to seize Mt. Gox funds.
According to online news service The Register letters were sent to several Canadian exchanges which said they are not considered money services businesses.
The Financial Transactions and Reports Analysis Centre of Canada (FTRACC): “confirmed the exchanges were not actually money service businesses and were therefore exempt from laws governing this type of firm.”
But this seems at odds with the actions of several Canadian banks who have acted unilateraly to close Bitcoin-related bank accounts.
LibertyBit warned its customers last week that its Royal Bank of Canada account had been shut for breaching rules.
RBC told LibertyBit it was closing its account for two reasons:
RBC had designated Libertybit as a Money Service Business (MSB), and thus considers us a high-risk account;
The virtual currency aspect of the Business’ product offering are outside of RBC’s risk profile for establishing an account.
LibertyBit appealed the decision on the basis that the bank’s definition of its business as a “Money Services Business” contradicted that of Canada’s regulator. It reassured its customers that the account closure would have no impact on its business.
LibertyBit questioned whether RBC Canada was imposing US rules on a Canadian business but accepted the bank’s right to reject any customer based on risk assessments. The exchange’s full blog post is here.
The situation is similar in the UK. Although there is anecdotal evidence that Bitcoin businesses have had requests for bank accounts turned down by British banks, financial regulators insist it is nothing to do with them.
CoinDesk was told by the Prudential Regulation Authority (son of the Financial Services Authority) that unless the businesses were offering bitcoin-based investments they would not be covered by regulations.
So any bank rejecting accounts from Bitcoin-based businesses were acting on their own, not on advice from regulators.