Crypto license in Canada

Fintech Harbor Consulting | Crypto license in Canada
Reviewer: Bohdan Popovchenko
Reviewer: Illia Ivanko
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Co-author: Oleksandr Maliuta
Table of contents

MSB, also known as the Canadian Crypto License or MSB registration, is an abbreviation for Money Service Business.

MSB is a unified, unlimited-in-duration registration in Canada that covers six types of activities:

  • Provision of payment services.
  • Foreign exchange dealing.
  • Dealing in virtual currency 
  • Crowdfunding platform.
  • Money transferring.
  • Issuing or redeeming money orders.

A company is required to register with  FINTRAC (Financial Transactions and Reports Analysis Centre) as MSB if it provides one or more of the above activities.

FINTRAC is one of 13 federal government agencies in Canada and is responsible for MSBs registration in Canada and oversees their compliance with Canadian legislation aimed at preventing money laundering and the financing of terrorist activities.

Is cryptocurrency legal in Canada?

Cryptocurrency is absolutely legal in Canada. Canada became one of the first countries worldwide that officially recognized Bitcoin and other cryptocurrencies in 2013. The Canada Revenue Agency (CRA) released its first guide on cryptocurrency operations on December 23, 2013..

According to the clarifications from CRA, Cryptocurrency is a type of virtual asset that is secured using cryptography. It typically uses a system known as a blockchain to record and maintain a history of transactions.

According to Section 8 of the Canada Currency Act, cryptocurrencies do not have the status of legal tender. Only bank notes issued and coins minted by the Bank of Canada are given the status of legal tender.

Fintech Harbor Consulting | Crypto license in Canada
For a more detailed understanding of the Canadian crypto market, we have explored some key data:
  • Canadian Cryptocurrency Market Revenue: According to the latest Statista report, the cryptocurrency market in Canada is projected to achieve US$1.7 billion in revenue in 2024.
  • Market Growth Forecast (2024-2028): With a forecasted annual growth rate of 8.37%, revenue in the Canadian Cryptocurrencies market is projected to rise to around $2.4 billion by 2028.

For comparison, this would mean the revenue in the crypto industry in Canada is expected to be more than 12 times the size of the revenue in the crypto industry in Turkey ($1.7 billion vs. $139.2 million), despite being more than twice smaller in population.

  • User Growth Forecast: The number of users in the Canadian cryptocurrency market is forecasted to reach 12.95 million by 2028, which represents about 33.86% of Canada’s population.
Fintech Harbor Consulting | Crypto license in Canada

What is a crypto permit in Canada? What is the Canadian MSB license?

MSB Registration or as it is more commonly known as Canadian Crypto Licence is a federal registration that is required for companies that provide one or more of the following activities:

  • Provision of payment services.
  • Foreign exchange dealing.
  • Dealing with virtual currency.
  • Crowdfunding platform.
  • Money transferring.
  • Issuing or redeeming money orders.

MSB Registration is issued for an unlimited period of time with a requirement to file reports every two years.

  • There are no local substance requirements for MSB registration in Canada. This means that you do not need to have a local office and Canadian employees to obtain a Canadian Crypto Licence (MSB).

Formal requirements for obtaining MSB registration include the following:

  • At least 1 director, 1 shareholder, 1 compliance officer and a Canadian address for correspondence.
  • Initially, all positions required for the MSB may be filled by a single person.

The Compliance Officer may be a foreign individual. Canadian citizenship is not required for this role. 

According to FINTRAC’s clarification of the requirements for a compliance program, an individual may be appointed as a compliance officer in his or her own business or appoint another person to this position.

MSB Regulation in Canada

Legal regulation applicable to MSBs in Canada is divided into 2 levels:

  • Rules at the level of MSB Registration  (level 1). At the Federal level, Canadian MSBs are regulated by two main laws, FINTRAC Guidelines and CRA Guidelines.
  1. (PCMLTFA) Proceeds of Crime (Money Laundering) and Terrorist Financing Act is the core act that regulates the procedure for MSB registration, and the requirements for MSB activities.

Specifically, the Act includes the following key requirements for MSB activities:

  • Section 5 (h1) describes key activities of MSBs.
  • Section 9.6 (1) establishes the requirement to have a Compliance Program.
  • Sections 7-9.8 establish the reporting requirements for MSBs.

2. PIPEDA (Personal Information Protection and Electronic Documents Act) regulates the collection, processing and storage of personal data of Canadian users of MSBs. Even though this Act does not regulate MSB activities directly, it establishes standards for personal data protection and confidentiality.

3.  FINTRAC’s Guidelines clarify the PCMLTFA requirements and also details the reporting requirements. In particular, the FINTRAC Guidelines include the following key requirements for MSBs:

  • 24 Hour Rule. Money Service Businesses are subject to a twenty-four-hour rule for reporting large cash transactions.
  • Large transaction records. MSBs must keep a large virtual currency (VC) transaction record when they receive VC in an amount equivalent to CAD 10,000 or more.

4. CRA Guidelines clarify the tax treatment of MSB operations. In particular, the specifics of cryptocurrency transactions, which in most cases are taxed as a barter deal (except the operation of purchase of cryptocurrencies for fiat).

  • Rules at the level of Company Registration (level 2).

In Canada, there are 2 layers where companies can be incorporated:
● Federal (Canada-wide)
● Provincial (at the level of each of the 10 Canadian provinces).

The most common province for company registration in Canada is British Columbia (BC). This is due to the fact that, according to the British Columbia Company Act, there is no requirement to have a local director in this province.

● To incorporate a company in BC, you need at least one director and one shareholder.
● The director and shareholder can be the same.
● There are no residency requirements for directors and shareholders of a BC company in Canada.
● All directors and shareholders may be located outside of Canada.

Under Section 9(1) of the British Columbia Company Act, upon incorporation, BC Registries must:
● issue a certificate of incorporation showing that the company is incorporated;
●  publish in the Gazette a notice of the incorporation of the company.

Why should you choose www.fintecharbor.com to receive a Canadian Crypto License in Canada?

Legal regulation of Cryptocurrencies and Fintech is our core specialisation. Our advantages include significant experience in obtaining MSB registrations and related experience in regulation of cryptocurrencies, payment and financial institutions. 

Each implemented project is not simply an obtained MSB registration, but a balance between strategy and implementation. We at Fintech Harbor Consulting do not offer general solutions but create individually tailored solutions for each specific business model and strategy.

Partners, not registrars. We at Fintech Harbor Consulting provide not only MSB registration services in Canada but all the services that an MSB may need from A to Z, including:

 Sale of ready-made companies with MSB registration in Canada.
Opening corporate bank accounts.
Annual corporate return in Canada at the federal level (T2).
Annual return in British Columbia at the provincial level.
Change of name, shareholders’ structure and directors.
International tax planning.
Preparation of contracts of any level of complexity.
Patent & Trademark registration.
Regulatory strategies.

Have questions? Contact us!
Please provide the date and time to contact you. According to Central European Time (UTC+1)
*Your contact information will be used for our inner purposes and only with the aim to provide you with the best business solutions.

Types of Canadian crypto licenses

In accordance with Section 5 of the Proceeds of Crime and Terrorist Financing Act, and guidance from FinTRAC, MSB may provide the following services:

1. Foreign exchange dealing 

  • Exchange between fiat currencies and other fiat currencies.
  • For example, exchange of £ for $.

2. Payment service provider

  • A person or entity facilitates transactions by intermediating payment instructions between buyers and sellers of goods or services.
  • For example, a platform that allows businesses to accept electronic payments.

3. Dealing in virtual currency

  • Exchanges between fiat and virtual currencies, and virtual currencies to each other.
  • For example, exchanging USDT for BTC or BTC for $.

4. Crowdfunding platform

  • Crowdfunding platform services that provide and maintain crowdfunding services “for use by other persons or entities to raise funds or virtual currency for themselves or for persons or entities specified by them.”
  • A website or an application or other software that is used to raise funds or virtual currency through donations.

5. Money transferring

  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network.
  • Over the last year FINTRAC has started to treat money transfer services in a very similar way to payment service providers

6. Issuing or redeeming money orders

  • Issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments.

The PCMLTFA does not specify that these types of activities need different registrations. 

This means that you can provide all types of services included in the application based on a single Canadian Crypto License.

Fintech Harbor Consulting | Crypto license in Canada

Requirements for MSB Registration

The requirements for obtaining MSB Registration or the Canada crypto license are relatively low compared to Virtual Asset Service Provider and Payment Institutions Authorizations in the EU, and include the following:

Requirements for MSB Registration in Canada
RequirementClarification
1. Directors Requirements1 director of any nationality
2. Shareholder Requirements1 shareholder of any nationality (may be the same person as a director)
3. Compliance Officer from any jurisdiction 1 shareholder of any nationality (may be the same person as a director or shareholder)
4. Document with a description of business mechanics and business operationsProvided by Fintech Harbor Consulting based on information from the client
5. Company Registered in CanadaProvided by Fintech Harbor Consulting
6. Canadian address for communication with FINTRAC and CRAProvided by Fintech Harbor Consulting

7. MSB Compliance Program (approx. 100-page document)

  • All AML/CFT policies and procedures required for MSBs in accordance with Canadian law.
  • Documents confirming compliance with the PCMLTFA and related laws.
Prepared by Fintech Harbor Consulting

Substance requirements

Minimum capital requirements

Not required

Local employees

Not required

Fintech Harbor Consulting | Crypto license in Canada

The process to receive a crypto license in Canada

Obtaining MSB registration in Canada is relatively uncomplicated compared to similar authorisations in the EU and involves the following steps:

Stage 1 (1 day)

  • Submission of documents for company formation and 3 options for company name.
  • Joint call with a lawyer and discussion of the plan.

Stage 2 (2 days)

  • Accelerated (24 hours) company name verification and reservation in the British Columbia Corporate Registry. 

Stage 3 (3 days)

  • Submission of an application and entry of the company in the BC corporate register.
  • Obtaining Certificate of Incorporation and Notice of Articles.

Stage 4 (1-2 days)

  • Preparation and completion of 4 questionnaires for MSB registration
  • Finalization of the client’s business model
  • Application for pre-registration of MSBs

Stage 5 (14 days)

  • Receiving a response from FINTRAC and completion of the 1st stage of Compliance.
  • Submission of the MSB pre-registration form. 

Stage 6 (1.5 – 2 months)

  • Completion of the 2nd stage of Compliance in FINTRAC / answering additional questions.
  • Video interview (if applicable)
  • Opening the MSB registration portal. 

Stage 7 (14 days)

  • Submission and evaluation of the final application for MSB registration.
  • Obtaining a message on successful registration from FINTRAC and entry of the MSB in the FINTRAC register. 
Fintech Harbor Consulting | Crypto license in Canada

* Timeline may differ depending on FINTRAC’s workload in any particular month.   

Comparative analysis of Canadian MSB registration as a combination and alternative to VASP and Payment Institutions Authorizations in the EU

According to the FINTRAC annual report, by March 31, 2022, there were 2,465 MSBs registered with FINTRAC in Canada.

According to the official registers of EU member states, there are approximately 2,400 officially registered cryptocurrency companies (VASPs) operating in the EU.

Fintech Harbor Consulting | Crypto license in Canada

Analysis of the Permitted Activities of European VASP and Canadian MSB registrations

While the European VASP is exclusively a cryptocurrency authorisation, the MSB is a combination of cryptocurrency and payment authorisations.

Canadian MSB

European VASP

1. Foreign exchange dealing (for example, exchange of £ for $) 

1. Crypto to fiat exchange (for example, exchange of $ for USDT or Bitcoin)

2. Money transferring/Remitting or transmitting funds

2. Crypto-to-crypto exchange (for example, exchange of USDT for Bitcoin) 

3. Dealing in virtual currencies (includes 1, 2 and 3 permitted activities for Polish VASP)

3. Brokering in exchange (Assisting in transactions between users)

4. Crowdfunding platform

4. Сustody services (crypto)

5. Payment service provider

 

6. Issuing or redeeming money orders, traveller’s cheques, or anything similar.



Comparative analysis of Canadian MSB and European Crypto Licenses

To determine whether an MSB Registration in Canada is the optimal solution for you, we have compared the requirements and opportunities of this license with European crypto licenses by all key criteria.

For convenience, we have included the following highlights in the comparative table:

  • Green means Advantages.
  • LIght Blue means Standard requirements.
  • Red means Disadvantages.
Name of license/ authorization /registrationMoney Service Business 

Crypto-asset Service Provider

(including VASP)

Virtual asset service provider 
Type of license/ authorization /registration

Mixed

(Payment & Crypto)

Mixed

(Crypto & Crypto investment)

Crypto
JurisdictionCanadaEU (MiCA)Poland
Minimum Initial Capital
  • According to the Proceeds of Crime and Terrorist Financing Act and FINTRAC guidelines, there are no initial capital requirements for MSBs. 

According to Annex 4 of MiCA, minimum capital requirements for crypto-service providers are divided into three classes.

  • €50.000 – Order management.
  • €125.000 – VASP.
  • €150.000 – Trading platform.
  • In Poland, there are no initial capital requirements for obtaining VASP authorization.
  • But, according to

Article 154 of the Polish Commercial Companies Code, the minimum initial capital for registering a limited liability company is zł5,000 (€1.165).

This requirement is formal and funds may not be contributed.

Permitted activitiesIn accordance with Section 5 of the Proceeds of Crime and Terrorist Financing Act, and guidance from FinTRAC, a Money Services Business (MSB) operating in Canada may provide the following services:

  • Provision of payment services.
  • Foreign exchange dealing.
  • Dealing in virtual currency (includes all activities for Polish VASP except custody).
  • Crowdfunding platform.
  • Money transferring.
  • Issuing or redeeming money orders.

According to Annex 4 of MiCA, a Crypto Asset Service Provider may provide the following services:
Class 1

  • Conducting client transactions
  • Positioning of crypto-assets
  • Facilitating orders for others
  • Client-focused crypto-asset transfers
  • Overseeing client crypto-orders
  • Crypto-asset consulting
  • Crypto-asset portfolio management

    Class 2 (VASP)
  • Any crypto-asset services specified in Class 1
  • Providing custody and administration of crypto-assets on behalf of clients
  • Exchange of crypto-assets against funds

Exchange of crypto-assets against other crypto-assets

Class 3

  • Any crypto-asset services specified in Class 1 and Class 2
  • Trading platform for crypto-assets services.
In accordance with Article 2, paragraph 12 of the Polish AML Act, a Virtual Asset Services Provider (VASP) operating in Poland may provide the following services:

  • Crypto to fiat exchange (for example, exchange of $ for USDT or Bitcoin)
  • Crypto-to-crypto exchange (for example, exchange of USDT for Bitcoin)
  • Brokering in exchange (Assisting in transactions between users)
  • Сustody services (crypto) 
Passportization
  • Canadian MSBs can’t passport services like European EMIs within EU.
  • Provision of services in the EU or other jurisdictions may be achieved by establishing a company within the EU or another jurisdiction and obtaining the relevant national license.
  • Partnership with a foreign company with an EMI, PI, or MiCA authorization or obtaining the status of an agent of a company authorized for EMI, PI, or MiCA (in jurisdictions where legislation allows such arrangements).
  • Pursuant to Article 59 of the MiCA, approved cryptocurrency companies are permitted to conduct business in the EU either by establishing physical offices (including branches) or by exercising the right to provide services. To make cross-border operations easier, the main supervising authority needs to be notified.
  • This mechanism is similar to that described in MiFID II, where according to Article 39(1) license holders have the right to provide investment services in other EU Member States through the establishment of branches on the basis of a single national license.
  • Polish VASPs can’t passport services like European EMIs within the EU.
  • Provision of services in the EU or other jurisdictions may be achieved by establishing a company within the EU or another jurisdiction and obtaining the relevant national authorization.
  • Neither the EU AMLD Directive nor the Polish AML Act provides for the possibility of providing VASP services in other countries. There are no authorization, passporting or reverse request mechanisms.
  • (Coinbase) an Irish company, a virtual asset service provider (VASP) registered with the Central Bank of Ireland, have been fined by the Dutch Central Bank (DNB) for €3,325,000.
  • Since VASP is a licensed (authorized) activity, it is not subject to the freedom to provide services within the EU.
Marketing of services in the EU
  • The PSD2 Directive does not directly provide for the possibility of providing customer-initiated services without obtaining a national license.
  • This means that in order to provide services within the European Union, obtaining EMI or PI authorization in one of the EU member states is required.

Upon notification by the national regulator: 

  • Sending emails to EU customers.
  • Having the website in EU languages.
  • Marketing in the EU.
  • Targeting advertising in the EU.
  • The AMLD V Directive does not directly provide for the possibility of providing customer-initiated services without obtaining a national authorization. 
Corporate income tax rates
  • Federal:15%
  • British Columbia:12%
  • Effective: 27%
  • Depends on each particular EU jurisdiction.
  • Standard:19%
  • Reduced: 9% (NOT APPLICABLE TO VASP)
Potential Customers
  • 36.82 million population
  • 448,4 million population
  • 38.25 million population
Timeline of receipt3-5 months2 – 4 months 1 – 2 months

FAQs

According to the FINTRAC annual report, by March 31, 2022, there were 2,465 MSBs registered with FINTRAC in Canada. 

Canada is an attractive location for MSB Registration because Canadian legislation does not impose minimum capital requirements and local employees.

MSB Registration is quite broad and includes the following activities:
● Provision of payment services.

  • Foreign exchange dealing.
  • Dealing in virtual currency.
  • Crowdfunding platform.
  • Money transferring.
  • Issuing or redeeming money orders.

 

While the European VASP is exclusively a cryptocurrency authorisation, the MSB is a combination of cryptocurrency and payment authorisations.

Canadian MSB

European VASP

1. Foreign exchange dealing (for example, exchange of £ for $) 

1. Crypto to fiat exchange (for example, exchange of $ for USDT or Bitcoin)

2. Money transferring/Remitting or transmitting funds

2. Crypto-to-crypto exchange (for example, exchange of USDT for Bitcoin) 

3. Dealing in virtual currencies (includes 1, 2 and 3 permitted activities for Polish VASP)

3. Brokering in exchange (Assisting in transactions between users)

4. Crowdfunding platform

4. Сustody services (crypto)

5. Payment service provider

 

6. Issuing or redeeming money orders, traveller’s cheques, or anything similar.

 
Obtaining MSB registration in Canada is relatively uncomplicated compared to similar authorisations in the EU and involves the following 7 steps: Fintech Harbor Consulting | Crypto license in Canada
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