MSB License in Canada
For decades now, Canada has remained a premier business destination for those seeking to launch a crypto startup for a good price, serve a vast community of clients, build trust with global banking partners, and expand with ease. And yet, this jurisdiction’s approach to crypto activities is absolutely unique when it comes to its regulation of the industry. Rather than mandating companies to obtain licenses for each specific category of crypto operations, Canada requires operators to register as Money Services Businesses (MSBs) with the local authority, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Whether you plan to launch a cryptocurrency exchange or wallet services, the key thing to do is to get your business officially incorporated as an MSB in this dynamic and reputable destination. Keep reading to find out how to proceed with your MSB registration, what the legal requirements are, how much it will cost, and what to keep in mind before entering the Canadian crypto market.
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What makes Canada a crypto-friendly jurisdiction?
When choosing a business destination for starting your crypto operations, there are a number of factors that determine the operational effectiveness of your projects, including the transparency of regulation, setup costs and requirements, compliance criteria, and the global reputation the jurisdiction holds in the global economy. Considering all of these elements of what a crypto destination is, Canada certainly holds a leadership position among other popular countries, and here is why:
1. Fully remote MSB registration
What draws international operators to setting up their business in Canada is the possibility of 100% remote company incorporation. This implies that once registered, your project accesses the vast community of over 40 million Canadian clients with no local office required. However, FINTRAC does require the applicants to appoint a qualified compliance officer and incorporate the company at a local address for correspondence.
2. Secure growth in the global market
Launching a business under FINTRAC demonstrates that your company is not only fully compliant with the regulator’s operational standards but also that it meets the robust security criteria. FINTRAC is recognized for its robust standards for responsible and transparent financial activities as it mandates the enterprises to combat money laundering, financing of terrorist activity, sanctions evasion, and threats to the security of the country. While the security checks by FINTRAC are rigorous, they are exactly what makes Canada one of the most reliable jurisdictions to anchor your business.
3. Credible banking infrastructure
One of the major advantages of operating from Canada is that MSB registration makes it significantly easier for traditional financial institutions and global banks to cooperate with regulated crypto companies. The key reasons for such a strong reputation of Canadian businesses stem from the country’s political stability, sophisticated banking, and effective, clear regulation of the crypto industry. Therefore, being listed on the official Canadian MSB registry translates into an immediate trust indicator and improves your ability to establish secure banking partnerships.
4. Clear and consistent regulation
Setting up your company in Canada seals your venture’s commitment to maintaining compliant financial operations when it comes to robust Canadian AML and CTF laws. Transparency and integrity remain FINTRAC’s key priorities and critical factors for building trust-based relationships with banks, international clients, investors, etc. Obtaining the MSB license in Canada, thus, best prepares you to serve institutional customers, communicate with investors and tech partners, as well as build reliable connections with banking partners.
The principles of crypto regulation in Canada
Before diving into the specifics of obtaining your MSB authorization, it’s worth exploring Canada’s unique approach to crypto operations and, specifically, its regulations and robust standards. To begin with, purchasing goods or services using digital assets is perceived as a taxable disposition in Canada. All digital-asset activities here are overseen by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and the Canada Revenue Agency (CRA).
FINTRAC is the Canadian regulator overseeing the MSB registration. This agency is in charge of ensuring the enterprises’ ongoing compliance with the Canadian legislation as well as the prevention of terrorist financing and money laundering. In order to legally operate in the jurisdiction, your enterprise must, therefore, adhere to FINTRAC’s eligibility requirements and be registered as a Money Services Business (MSB).
There are 2 levels of company registration under FINTRAC, namely the Canada-wide (federal) and provincial levels. The latter applies to each of the 10 provinces in the country. Out of them, British Columbia (BC) remains the most commonly selected destination for company setup due to its flexible launch conditions and no requirement for appointing a resident director in the province.
Permitted activities
Upon getting your company registered in Canada, your business is authorized to offer the following services:
- Foreign exchange dealing, including the fiat-to-fiat exchange;
- Monetary means transfers;
- Payment services providers, including TransferGO, Wide, and others;
- Issuing and redeeming money orders, traveler’s cheques, and other similar instruments;
- Dealing in digital currencies, including crypto exchanges and transfers;
- Crowdfunding platforms.
While the FINTRAC authorization is often sufficient for these services, additional requirements apply to businesses acting as Payment Service Providers (PSPs). Those companies holding, routing, or transmitting fiat money for clients, or initiating payment instructions on their behalf, must also proceed with registration with the Bank of Canada beyond the standard MSB authorization.
Compliance criteria for the Canadian MSB licensing
Complying with FINTRAC’s standards for crypto ventures is essential when it comes to securing your spot in Canada’s crypto market. Below is the list of the eligibility criteria for crypto operators who plan to anchor their activities in Canada:
- Company incorporation: Official company incorporation in Canada is mandatory for all enterprises who seek to expand their operations in this jurisdiction and beyond. The applicants often choose British Columbia (BC) among other provinces thanks to its flexible launch conditions, including no requirements for appointing a resident director.
- Key management: To legally operate as a Canadian MSB, you must appoint at least 1 director and 1 shareholder. Moreover, they can be the same person if that’s required. Certain provinces also do not apply any residence requirements for those positions, meaning that all directors and shareholders can be located outside of Canada if needed. Besides, an expert compliance officer must be appointed in order for your company to qualify for the Canadian MSB authorization. This hire can also be presented by the same person as a director or shareholder if needed.
- Recent and accurate documentation: Providing an accurate set of documents is necessary to maximize your chances of getting the MSB application approved as quickly as possible. Those, namely, include the personal identification for each of the key employees, a detailed business plan outlining the nature of intended services, the company website if available, proof of the professional background of shareholders and directors, AML and CTF protocols, and other relevant documentation.
Documents required for the MSB license Canada
Submitting complete and accurate documentation is a key factor that maximizes the success of your MSB application. In order to guarantee the final approval of your application, all information you provide to FINTRAC must be clear, transparent, accurate, and complete. Here is the list of the core documents to prepare:
- Robust Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) policies;
- Personal identification documents for directors, shareholders, and the compliance officer;
- A detailed business plan or description of intended crypto activities;
- Company website (if available);
- Proof of address for directors, shareholders, and the compliance officer;
- The criminal record certificate of key hires, recently issued;
- Proof of company ownership and structure, including beneficial owners;
- Detailed information on the range of financial activities to be performed, expected transaction volumes, flow of funds, demonstrating how customer transactions will be processed and routed.
All paperwork must be written in either English or French, and notarization or cooperation with a registered agent may be requested by the regulator in certain situations. Make sure to contact our legal consultants for tailored assistance with preparing the right set of documents for your MSB authorization.
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Setup and ongoing licensing costs
As you plan to secure your Canada MSB licence for crypto exchange, the associated expenses are important to consider. While the ongoing fees applicable after successful authorization are unique to each MSB, the setup costs are generally the same for all applicant businesses. Here is the breakdown of the core fees to expect in the first year of launching your company in Canada:
- Company’s name registration;
- Registered address in Canada;
- Preparation of the AML and CTF policies;
- Company registration, including state fees;
- Preparation of a detailed business plan;
- Professional and legal fees.
These are the key services that come in the first-year expense list for your MSB registration. Once you have secured your authorization, the ongoing expenses generally include:
- The MSB renewal every 2 years;
- Salary for key hires (if applicable);
- Operational maintenance;
- Post-licensing legal maintenance (optional);
- Other fees associated with keeping your venture fully compliant and committed to FINTRAC’s security and operational standards.
The exact prices are available upon contacting our legal consultants.
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Step-by-step guidance on MSB registration
Compared to other popular frameworks like MiCA in the EU and others, FINTRAC provides a generally straightforward authorization process for crypto companies. The entire procedure often takes between 2 and 4 months, given that the submitted documents are accurate and complete and all eligibility requirements are met. Below is an overview of each step of the MSB authorization:
1. Business incorporation in Canada
The procedure begins with getting your crypto business registered with the Corporate Registry. This stage involves reserving the name for your business and registering your Canadian mailing address. If no deals occur, it can be completed within 1 week. Upon completion of this stage, you will receive a Certificate of Incorporation, Articles of Association, and other supporting documents confirming your enterprise’s legal status in Canada.
2. Document preparation and MSB application submission
The next step is to collect, polish, and submit the MSB application to FINTRAC, along with the supporting documents.
3. Application revision by FINTRAC
Once submitted, your application will be thoroughly reviewed by FINTRAC, which may take anywhere from 4 to 6 months, depending on the accuracy of your paperwork, the complexity of your business model, and other crucial factors. During this stage, be ready for FINTRAC’s requests for additional information or paperwork, as well as completion of relevant questionnaires or interviews if needed.
4. MSB registration approval
Upon the final incorporation confirmation, your business will be officially listed as an MSB in the FINTRAC registry. Importantly, the MSB registration is valid for two years and must be renewed promptly in order to keep your operations legal in the jurisdiction.
5. Compliance with RPAA legislation (for PSPs only)
While the previous 4 stages are generally enough for most MSBs, one more step is required for PSPs. For service providers, the process also involves complying with the Retail Payment Activities Act (RPAA) legislation and collecting the necessary documents for PSP registration with the Bank of Canada. Our legal experts provide tailored assistance with this stage of your MSB authorization process, helping you open the bank accounts, draft the required documentation, and handle other associated financial aspects of the procedure.
6. License maintenance
The authorization process doesn’t end at the moment you receive your MSB license. Rather, in order to keep your operations compliant in the years to come, it’s crucial that you take steps to maintain your ongoing full adherence to the RPAA requirements on time. Aware of the significance of post-application compliance, our consultants offer end-to-end support with the following aspects:
- Drafting responses to the requests from the relevant authorities, regulators, and financial institutions;
- Preparation of legal documentation for banks, EMIs, PSPs, and payment providers;
- B2B contract reviews;
- Navigating the website’s legal updates;
- Preparation of Contractor Agreements, NDAs, and employment-related legal documents.
FAQ
Which businesses are required to register as an MSB?
Every business in Canada that aims to provide the following services is required to proceed with MSB registration:
- Virtual currency operations;
- Foreign exchange;
- Money transfers;
- Traveler’s checks issuance and buyout;
- Crowdfunding platforms;
- Payment service providers (under additional PSP registration with the Bank of Canada);
- Redeeming or issuing money orders;
- Facilitating fiat payments between third parties (under additional registration and compliance requirements).
Is an MSB licence mandatory for cryptocurrency companies in Canada?
Yes, MSB registration is a critical step towards launching legal crypto operations in Canada. While the jurisdiction does not have a typical license for cryptocurrency businesses, the MSB registration under FINTRAC acts as an official entry into the country’s crypto economy.
What services can be provided under an MSB registration?
Once your business is incorporated in Canada and meet FINTRAC’s compliance requirements, your company is permitted to provide the following range of services:
- Foreign exchange;
- Monetary means transfers;
- Issuing and redeeming orders;
- Crowdfunding platforms;
- Dealing in virtual currency;
- Payment service providers.
Besides, the additional registration in accordance with the Retail Payment Activities Act (RPAA) is mandatory for companies engaging in certain PSP activities which involve facilitating fiat payments between third parties. If your business fits into this category of operations, make sure to contact a trustworthy team of legal specialists for tailored assistance with business registration.
Can a non-Canadian company obtain an MSB licence?
Yes, foreign entrepreneurs can register their businesses in Canada once they have met FINTRAC’s compliance requirements and local presence standards.
Can fintech startups obtain an MSB licence in Canada?
Yes, FINTRAC allows fintech enterprises to anchor their activities in Canada, given they fully comply with the regulator’s requirements.
Is Canada a crypto-friendly jurisdiction for MSBs?
Yes, Canada is one of the most crypto-friendly countries today due to its operational flexibility, fully remote business registration, affordable company setup, clear regulation, and credibility with the global banking partners.
What are the ongoing costs of maintaining an MSB licence?
The core ongoing costs are associated with maintaining your company’s full compliance with the current legal requirements, including the local office space, key hires, audits, license renewal, and others. Importantly, the Canadian MSB licensing must be renewed every two years at an additional cost in order for your business to continue offering its services legally.
