Do you need a license to trade cryptocurrency in Canada?

If you operate a cryptocurrency exchange in Canada, it's mandatory to obtain a crypto exchange license by registering as a Money Services Business (MSB) with FINTRAC, ensuring compliance with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) regulations.

What services can I offer with a Canada crypto license aka MSB license?

IcWith a Canada crypto exchange license, also known as an MSB license, you are permitted to offer a range of services including cryptocurrency exchange transactions, digital asset transfers, and providing cryptocurrency wallet services among others.

How about AML/CFT compliance for Canada MSB?

MSBs are registered with FINTRAC as the Supervisory Authority for Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) purposes. They need to have extensive AML/CFT compliance policies, including Know Your Customer (KYC), Suspicious Transaction Reporting, and Risk Assessments.

Are there residency requirements for owning a Canada MSB?

cThere are no specific residency requirements for owners; MSBs can be formed with owners of any nationality and resident anywhere in the world. British Columbia and Ontario do not require a resident director, but a resident director may be needed to open local bank accounts in Canada.

What are the requirements to obtain an Crypto License in Canada?

The company must have a physical office in Canada crypto license, be registered with FinTRAC, comply with AML/CTF policies, and have a staff member responsible for compliance. All founders, shareholders, and employees must have clean criminal records in their country of citizenship.

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CRYPTO LICENSE CANADA

Consulting24 offers assistance in obtaining MSB license aka Crypto License Canada, essential for crypto businesses in Canada's flexible and legally secure financial services sector.

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CANADA CRYPTO LICENSE: OUR TEAM HELPS IN FACILITATING YOUR LICENSE ACQUISITION.

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CANADA CRYPTO LICENSE EXPLAINED

Financial enterprises offering crypto trading for customers must adhere to Canadian regulations designed to identify criminal conduct and thwart money laundering activities. Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), two main categories of financial entities are obligated to fulfill these duties in Canada:

1. Foreign Money Service Businesses (FMSBs)

2. Money Service Businesses (MSBs)

Both will permit to offer services associated with virtual currencies.

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CANADA CRYPTO EXCHANGE LICENSE: YOUR PATHWAY TO COMPLIANCE AND OPERATION

A business that wants to provide crypto exchange services qualifies as a Money Services Business (MSB) in Canada if it meets specific criteria:

The business provides at least one of the following MSB services to its clientele: currency dealings, currency exchanges, funds transfers, facilitation of financial transactions for third parties, or intermediation in bill and utility payments, wages, mortgages, loans, etc. This excludes payments made exclusively towards debt settlement when instructions are provided directly to the debtor.
It engages in the issuance or redemption of money orders, traveler's checks, or similar negotiable instruments, except when cashing checks made out to a specific individual or selling traveler's checks on behalf of the issuer.
It offers services pertaining to virtual currency, which includes the exchange of fiat to virtual currency, swapping of one virtual currency for another, the transfer or reception of virtual currency, or maintaining a crowdfunding platform for finance or virtual currency.

Additionally, a business is considered to be operating within the MSB framework if:

It conducts business within Canada, maintains a physical presence, employs staff or agents, or has established a branch in the country.
It holds a license or is registered for activities linked to any of the services mentioned above.
It actively promotes any of the above services through various advertising channels, including media, online platforms, billboards, etc.
It conducts financial remittance or foreign exchange transactions exceeding $1,000 per transaction, issues and redeems negotiable financial instruments beyond $1,000 per transaction, or records income from any of these services for taxation purposes.

MONEY SERVICES BUSINESS (FMSB) EXPLAIND

A business is designated as a Foreign Money Services Business (FMSB) if it operates as an MSB outside of Canada's borders while serving Canadian clients. The criteria for an FMSB include:

Offering MSB-type services without a physical establishment, employee base, or representatives within Canada.
Engaging with customers within Canada, which can be indicated by marketing efforts aimed at Canadian residents, managing a ".ca" domain, or being listed in the Canadian Business Directory.
Serving individuals in Canada, discernible through their local residential addresses, documentation from Canadian authorities, bank cards from Canadian institutions, or if they are residing temporarily in Canada for work, study, or leisure.

COMPARING MSB AND FMSB LICENSING IN FINANCIAL REGULATION

CRITERIAS FOR OBTAINING AN MSB LICENSE FOR CRYPTO

Registration and Compliance: Entities must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and adhere to all applicable anti-money laundering (AML) and counter-terrorist financing (CTF) guidelines.
Operational Details: Applicants should provide detailed operational information, including ownership structure, the nature of services offered, and internal policies and procedures for AML/CTF.
Financial Reporting: Regular financial reporting and record-keeping are necessary to maintain transparency and facilitate oversight.
Know Your Customer (KYC): MSBs are required to implement KYC processes to verify the identity of their customers and maintain detailed records of transactions.
Risk Assessment: A risk assessment must be conducted to identify potential risks related to money laundering and terrorist financing within the company's operations, with procedures in place to mitigate identified risks.
Training Programs: Staff must be trained in AML/CTF compliance, and a compliance officer should be appointed to oversee the implementation of the company's AML/CTF framework.

MSB LICENSE REQUIREMENTS

A physical office within Canada is required.
Registration with FinTRAC is mandatory.
Development and adherence to comprehensive AML/CTF policies, including risk management and surveillance protocols, are essential.
Adherence to client identification, meticulous record-keeping, and stringent reporting regulations is non-negotiable.
Founders, shareholders, and employees must have a clean legal background, substantiated by non-criminal record certificates from their country of origin.
The appointment of a dedicated compliance officer to oversee AML/CTF frameworks is a critical requirement.
Vigilant monitoring of suspicious transactions and mandatory reporting to relevant authorities is required.
The company's board must include at least one director with financial expertise.

PROCESS OF OBTAINING MSB LICENSE

The entire process to establish a Money Services Business, from registration to operational readiness including bank account setup, typically takes around 3-4 months.

Step 1 - Gathering Client Documentation to Initiate the Process

Initial Project Review
Acquisition of KYC Details
Business Overview Development of AML/CTF Strategies

Step 2 - Company registration in Canada

Selecting a Company Name
Securing Office Space and Finalizing a Lease Agreement
Establishing the Share Capital
Notarization of Corporate Documentation
Hiring Financially Skilled Personnel

Step 3 - Open a bank account

Drafting and Notarizing Official Documents
Opening bank account
Deposit share capital

Step 4 - Submitting documents for an MSB license

Drafting and Customizing Documents for AML/CTF Compliance in Crypto Operations
Recruitment, Training, and Onboarding of Staff
Filing the License Application

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