Finance Committee on Feb. 8th, 2018

[Annette Ryan]

The last review pointed us toward the evolving types of payments. It included things like pre-paid cards. We have brought forward legislative and regulatory changes that attempt to capture the innovation that's going on in the financial space. As new methods come on-stream that bring greater convenience to Canadians, we want to ensure that we capture them in the regime, but that we do it with a sensitivity to local realities.

For example, we received in consultations the advice that pre-paid cards are important for remote communities that may not have branch banking. We wanted to be careful not to bring in new requirements that would be onerous for people trying to do basic transactions.

[The Chair, Liberal, Wayne Easter]

Thank you.

Ms. O'Connell, you're on.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

I just have a question in regard to cryptocurrency and whether the international community agrees somewhat with the definition. I know that Canada has defined it in some of the reports and FATF has come out with a definition as well.

Internationally speaking, is cryptocurrency being defined somewhat consistently? If not, I would think that would lead to issues in the international regulation of it. Or, is it still too early to define it, because jurisdictions are still figuring it out amongst themselves? I guess my question is really about the defining of cryptocurrency and figuring out how we globally regulate it.

[Ian Wright]

I'll just speak quickly to the FATF and where we are. I think Maxime can talk in more detail about where we are.

Clearly, within the financial action task force and within our guidance there's quite a clear understanding of what the cryptocurrencies are. Again, it's this balance. We're not directly trying to regulate cryptocurrencies. We're just trying to ensure that there's a mechanism for making payments and for transferring value. It falls under the regime in the sense of record-keeping, knowing who they are, and managing the risks. I think there's a fairly well-known understanding of what the requirements are within our FATF environment.

Maxime can talk a bit more about the actual work we're doing.

[Maxime Beaupré]

It is one issue to nail down exactly what we're talking about in regulatory-speak, but people know what we're talking about. That's not necessarily the issue. As Ian pointed out, the purpose of the regulations we're working on is not to regulate the virtual currencies themselves. I'm not aware of any country attempting to do that. What we are attempting to do is what we call the “on-ramps” and “off-ramps”. There is a level of anonymity within the virtual currency space, although I would posit that there's actually a great detailing of records that also takes place; it's just that you don't necessarily know who is sitting behind it.

In terms of our purpose, once you try to move between the virtual currencies, or move into what we call “fiat” currencies—the Canadian dollar, for example—for all of these on-ramps and off-ramps there are requirements in place. When those dealers in virtual currency offer the service of converting virtual currency into dollars, let's say, they apply the types of obligations that money-service businesses have to apply in terms of defining the client, keeping records of the transactions, and so on.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I'm not a lawyer, and I don't know if any of the three of you are lawyers. How much does the charter weigh upon you in terms of recommending

solutions

to address these issues?

[Annette Ryan]

It weighs on us fundamentally and heavily and significantly. I think your opening question set forth the competing objectives in this space. There's respect for the charter. There's effectiveness in terms of safety and security of Canadians. Then there's the appropriate burden in both the private sector and public sector, the appropriate resourcing.

In terms of compliance with the charter, we have structured the regime from its initial stages to put in place this division in terms of what FINTRAC receives in terms of its information. Then there's the fact that it doesn't do investigations but rather passes the information, once it meets a reasonable threshold, to law enforcement agencies, such as CRA and others, that have the appropriate warrant powers and safeguards in their own space to make sure that Canadians' information is being used appropriately.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

The charter is also a flexible document, though. I mean, it does take into account the changing attitudes of the time. Is there a sense, at least among officials, that the charter could evolve, or that the context could evolve, so that the charter might be more flexible on the question of tracking or putting more limitations on the right to privacy so that we can ensure that we're not engaging in money laundering or terrorist financing?

[Annette Ryan]

Mr. Chair, I would defer the large part of that question to my Justice colleagues, who I understand will be invited to appear.

I think the evolution in the legal space, coupled with the evolution in the technological space, does give promise that it's the algorithms, the patterns involved, that are problematic and can be brought together so that it's people's suspicious behaviour that surfaces to the fore, along with the right protections to ensure that there isn't inappropriate search and seizure and other legal concepts that the charter was put in place to protect in that balance of democracy and privacy versus safety and security.

[The Chair, Liberal, Wayne Easter]

We will have to leave it at that.

Thank you all.

For people who may pay attention to this committee versus the Department of Finance's website, I do note that the discussion paper is on department's website. I understand that submissions on this paper will close on April 30. That's just for your information.

I think you can figure on being invited back on the discussion paper itself, although I do note that in here you lay out the key developments since the last review and legislative and regulatory amendments. In response to what Mr. Dusseault asked earlier, please try as best you can—I know and have been told that it's fairly difficult—to give us some kind of response on what has happened with each of the 18 recommendations that were in the last Senate review report.

Dan.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

In regard to the website and whatnot, because there are a number of people who may want to follow the committee's work, and since we've referenced the document, perhaps we could put a link to it on our website, as well as to some of the information the analysts have prepared. I'm not sure if that's in line with protocol, but I certainly think that the more people know about this and get involved, the better.

[The Chair, Liberal, Wayne Easter]

Okay. We can look at that doing that as the finance committee.

Thank you again. I think we had a very broad exchange.

The meeting is adjourned.