Obtaining a Cryptocurrency License in Canada
Launching a cryptocurrency business in Canada requires strategic planning and a thorough grasp of the regulatory landscape. As a global leader in crypto regulation, Canada enforces strict compliance measures to ensure transparency and security within the industry. This guide provides a structured approach to legally establishing a crypto-related enterprise in Canada.
Choosing the Right Business Entity
Selecting the appropriate business structure is a crucial first step. Entrepreneurs can register as a sole proprietorship, partnership, or corporation, each offering distinct legal and tax implications. Most cryptocurrency ventures opt for a corporate entity, as it provides limited liability protection and facilitates investment opportunities.
Canada’s Evolving Crypto Regulatory Framework
Canada is continuously refining its approach to cryptocurrency regulation, aiming to foster technological advancement while ensuring financial security and investor protection. Entrepreneurs and investors in the crypto space must stay informed about the evolving legal landscape to operate within compliance. This guide outlines the key regulatory bodies, legal requirements, compliance obligations, and tax considerations for cryptocurrency businesses in Canada.
Key Regulatory Authorities
Cryptocurrency oversight in Canada is managed by two main regulatory bodies: the Canadian Securities Administrators (CSA) and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The CSA governs securities-related matters, including investments in digital assets and token offerings, while FINTRAC enforces anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, overseeing financial service providers engaged in crypto transactions.
Legal Framework and Compliance Standards
Canada was among the pioneers in introducing cryptocurrency regulations, incorporating digital assets under its Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in 2014. This mandate requires crypto exchanges and wallet providers to register as Money Services Businesses (MSBs) with FINTRAC, ensuring compliance with AML/CTF protocols. Since then, regulatory authorities have issued numerous directives clarifying the application of securities laws to crypto assets, including guidelines on token sales, initial coin offerings (ICOs), and the classification of digital assets as securities under specific conditions.
Compliance Responsibilities for Crypto Businesses
Companies dealing in cryptocurrencies must adhere to stringent compliance obligations, including registering with FINTRAC, implementing risk-based AML/CTF controls, maintaining transaction records, and submitting reports on suspicious activities. Additionally, if a company’s digital assets qualify as securities, it must comply with Canadian securities laws.
Consumer Protection Measures
Canadian regulations emphasize user protection by requiring transparency in crypto-related offerings. Businesses must provide clear disclosures about their services, associated risks, and security measures to safeguard customer assets and personal information.
Cryptocurrency Taxation Policies
The Canada Revenue Agency (CRA) treats digital currencies as commodities, meaning crypto transactions may be subject to capital gains tax or business income tax, depending on the nature of the activity. Businesses and individual traders are required to maintain accurate records of their crypto-related transactions for tax reporting purposes.
Types of Cryptocurrency Licenses in Canada and Their Scope
Canada’s regulatory framework for cryptocurrency businesses includes two main types of registrations under the Money Services Business (MSB) category, differing based on the applicant’s geographic presence:
- MSB Registration – Available to companies incorporated in Canada.
- Foreign MSB Registration – Designed for businesses based outside Canada that serve Canadian customers.
Entities holding an MSB license can engage in one or more of the following financial activities:
1. Virtual Currency Transactions
- Facilitates the exchange of cryptocurrencies for fiat currency or other digital assets.
2. Foreign Currency Exchange
- Enables the conversion of one fiat currency into another (e.g., CAD to EUR).
3. Fund Transfers and Remittance Services
- Allows businesses to electronically send fiat currency to individuals or entities.
4. Issuance and Redemption of Financial Instruments
- Covers money orders, traveler’s cheques, and similar negotiable instruments.
5. Crowdfunding Platform Operations
- Authorizes the operation of crowdfunding platforms for third-party fundraising activities (excluding fundraising for the platform itself).
Steps to Obtain a Crypto License in Canada
Securing a cryptocurrency license in Canada involves a structured process that varies depending on whether the company is locally incorporated or based overseas. Canadian businesses must apply for a Money Services Business (MSB) license, whereas foreign entities must register as Foreign MSBs (FMSBs). The following outlines the key steps involved in obtaining a crypto license in Canada:
Business Registration
- Domestic companies can incorporate in any Canadian province, though specific requirements may vary by jurisdiction
- Foreign companies must apply for an FMSB license and may be required to establish a physical presence in Canada.
- Businesses must secure a local bank account for financial operations.
Compliance Program Development
- A robust compliance framework must be implemented to meet FINTRAC’s regulatory requirements.
- The program must include anti-money laundering (AML) and counter-terrorist financing (CTF) measures, transaction monitoring systems, and Know Your Customer (KYC) protocols.
- Employee training materials and internal policies should be documented.
Appointment of a Compliance Officer
- A qualified Compliance Officer must be designated to oversee regulatory adherence.
- This individual should hold a senior role within the company and possess relevant expertise in financial compliance.
Application Submission
- The application, including all necessary documentation, is submitted through FINTRAC’s MSB Registration system.
- The process typically takes 3 to 4 weeks for document preparation.
Review and Approval
- Once the application is submitted, FINTRAC reviews it within approximately 2 weeks.
- Additional clarifications or supplementary documents may be requested before final approval.
ABM Global – Comprehensive Services for Canada Crypto Licensing & Compliance
ABM Global offers expert guidance for businesses seeking to obtain a cryptocurrency license in Canada. Our services cover the entire process, from initial registration to ongoing compliance, ensuring your business operates within the regulatory framework set by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Canadian Securities Administrators (CSA).
Our Crypto Licensing Services Include:
Business Structure & Registration – Assisting in setting up a Canadian or foreign entity and applying for the appropriate Money Services Business (MSB) or Foreign MSB (FMSB) license.
Regulatory Documentation & Compliance Program Development – Preparing and implementing a strong AML/CFT framework tailored to your business needs.
FINTRAC Registration & Approval Support – Managing the application submission process and ensuring all requirements are met for quick approval.
Ongoing Compliance for Crypto Businesses in Canada
Securing a cryptocurrency license in Canada is just the first step—ongoing compliance is essential to maintaining regulatory approval and avoiding penalties. Canadian crypto businesses must continuously adhere to FINTRAC’s anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, as well as evolving requirements from the Canadian Securities Administrators (CSA). ABM Global provides full-spectrum support to ensure businesses remain compliant and operate securely within the legal framework.
Key Areas of Ongoing Compliance
AML Policy Updates & Regulatory Adherence
The regulatory landscape for cryptocurrency businesses is dynamic, requiring frequent updates to AML policies. Our services include:
Policy Revisions – Ensuring AML policies align with the latest FINTRAC guidelines and emerging regulatory changes.
Risk-Based Approach Implementation – Regularly assessing risks associated with crypto transactions and updating internal risk frameworks.
Internal Compliance Audits – Conducting periodic reviews to evaluate the effectiveness of AML procedures.
2. Regulatory Reporting & Audits
CDD and KYC procedures are crucial for preventing financial crimes in the crypto industry. Businesses must verify customer identities and assess risk levels. Our services ensure:
Enhanced KYC Checks – Implementing identity verification processes for individuals and corporate clients.
Risk Classification & Ongoing Monitoring – Categorizing customers into risk levels (low, medium, high) and conducting continuous due diligence.
Source of Funds Verification – Ensuring all crypto transactions meet legal transparency requirements.
Transaction Monitoring & Suspicious Activity Reporting
To comply with FINTRAC’s regulations, crypto businesses must have an efficient system for tracking transactions and identifying suspicious activity. Our services include:
Automated Transaction Monitoring Systems – Implementing AI-driven tools to detect unusual patterns.
Suspicious Transaction Reporting (STRs) – Filing reports with FINTRAC when suspicious activities are detected.
Large Cash & Virtual Currency Transaction Reporting – Ensuring compliance with threshold-based reporting obligations.
Employee AML Training & Awareness Programs
Regular staff training is required to keep employees informed about AML compliance, fraud prevention, and new financial crime tactics. ABM Global provides:
Customized Training Programs – Educating staff on recognizing red flags in crypto transactions.
Regulatory Compliance Workshops – Covering updates to AML/CTF regulations and best practices for maintaining compliance.
Ongoing Testing & Certification – Ensuring employees stay updated with evolving compliance standards.
Cybersecurity & Crypto Asset Protection
With the rise of financial cyber threats, securing digital assets and customer data is a critical component of compliance. Our cybersecurity measures include:
Multi-Layered Security Protocols – Enhancing protection against hacks, fraud, and data breaches.
Cold Storage & Wallet Security Strategies – Implementing best practices for safely storing digital assets.
Incident Response & Recovery Plans – Developing protocols for managing security breaches or fraud incidents.
Regulatory Reporting & Record-Keeping
Crypto businesses in Canada must maintain accurate records of transactions, compliance activities, and customer data. We assist with:
Maintaining Five-Year Record Retention – Ensuring all transaction and customer records are stored as per FINTRAC requirements.
Filing Compliance Reports – Managing submission of required financial and operational reports.
Regulatory Liaison Support – Assisting with regulatory inquiries and audits.
Stay Compliant with ABM Global
Ongoing compliance is critical for avoiding regulatory penalties and ensuring business continuity. ABM Global provides comprehensive support, keeping your crypto business fully aligned with Canadian laws.