Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.
posted 2 months ago
Navigating Canada’s crypto landscape begins with a single, non-negotiable mandate for exchanges, brokerages, and custody providers: Money Services Business (MSB) registration with FINTRAC. Far from being a bureaucratic hurdle, this federal requirement is the cornerstone of operating a recognized and trusted digital asset service in the country, as well as a necessary first step for businesses interested in obtaining a crypto license in Canada.
For companies evaluating Canada as a jurisdiction, success depends on understanding what MSB status entails and aligning operations with regulatory expectations from day one.
This article provides practical insights on:
With that foundation established, the next step is to examine how Canada’s regulatory environment is structured and supervised.
Canada regulates digital asset activities primarily through its federal anti–money laundering and counter-terrorist financing framework. The approach is rules-based and designed to ensure transparency, accountability, and financial system stability without prohibiting innovation. Three core elements define how crypto businesses are positioned within the Canadian regulatory system.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the federal agency responsible for overseeing compliance obligations for entities that qualify as Money Services Businesses (MSBs). Its responsibilities include:
Any crypto company offering covered services to clients in or from Canada must register with FINTRAC and adhere to its regulatory expectations. Registration creates a formal compliance relationship between the business and the regulator.
Under Canadian law, an MSB is a business that provides certain financial services, including:
Crypto companies typically fall under the final category. A business is considered to be “dealing in virtual currencies” if it:
This definition applies even to businesses outside Canada. If a company targets Canadian users or advertises its services to the Canadian market, it is considered to be conducting business within the Canadian jurisdiction and must register.
MSB registration is centered on AML, KYC, and transaction oversight, but not all digital asset platforms are regulated solely as MSBs. Depending on the assets offered and the structure of the business model, other regulatory classifications may apply.
For example:
This makes MSB status one component of a broader framework: AML compliance is handled federally through FINTRAC, while investment-related oversight falls under provincial securities authorities. A comprehensive regulatory assessment, therefore, depends on both the nature of the digital assets and the functions the platform performs.
Operating a crypto business in Canada generally requires registration as a Money Services Business (MSB) with FINTRAC. For many companies, this step also serves as the functional basis for obtaining a crypto license in Canada, as it brings the business into the official anti-money laundering and counter-terrorist financing (AML/ATF) system and provides regulators with the ability to monitor digital asset activities carried out in or from Canada. While the process is not as complex as a traditional banking license, it involves clear obligations that must be met from the outset.
Registration with FINTRAC is mandatory when a business engages in “dealing in virtual currencies” or performs other regulated financial activities. The process is performed online and includes:
Registration must be completed before the company begins serving Canadian customers. If the business is based abroad, it may still be required to register if it actively targets or services users in Canada.
After approval, the company is listed in the public MSB registry and becomes subject to ongoing supervision.
FINTRAC expects every MSB to establish and maintain a documented compliance program suitable to the scale and risk profile of the business. Core elements include:
Even startups must demonstrate that policies are live, operational, and not merely theoretical.
FINTRAC requires MSBs to submit specific reports within defined timeframes. These typically include:
Records supporting customer identity, activity details, and transaction rationale must be maintained and readily available for audit.
FINTRAC oversees AML and transaction reporting at the federal level but some business models may require additional regulatory attention depending on the nature of the products offered.
For example:
The evaluation is not based solely on technology but on the economic and legal characteristics of the product or service. As a result, many companies begin their analysis with MSB obligations and then conduct a secondary assessment to confirm whether securities licensing may also apply.
Canada applies established tax principles to digital assets rather than treating cryptocurrency as a separate category of financial instrument. For MSBs and other crypto service providers, this means that traditional corporate income tax, record-keeping obligations, and reporting requirements generally apply. However, certain activities have unique considerations depending on how revenue is generated and how digital assets flow through the business.
Companies operating in or from Canada are typically subject to federal corporate income tax, plus provincial or territorial tax, depending on the business location. Revenue generated from crypto operations is treated as ordinary business income for tax purposes. This may include:
Foreign companies registered as MSBs but not permanently established in Canada may have a different tax profile, depending on corporate presence and tax residency. The Canada Revenue Agency (CRA) evaluates these situations based on factors such as the location of management and decision-making, permanent establishment status, local staff or operational infrastructure, and where customers are located.
Crypto MSBs are expected to maintain comprehensive financial records that support revenue recognition, cost of operations, customer transactions and balances, as well as crypto inventory movements (if applicable).
CRA requires that records be retained for a minimum of six years and be sufficient to substantiate:
Businesses using cryptocurrency as part of their operations must track the fair market value at the time of receipt, the time & date of each transaction, and the cost basis for assets disposed of.
Failure to maintain adequate documentation can lead to penalties or tax reassessment.
The tax treatment of transactions depends on whether the business is trading digital assets on its own account or merely facilitating transactions for customers.
As digital asset classifications evolve, CRA guidance continues to expand, particularly for novel instruments such as staking rewards, yield-bearing products, and tokenized securities.
Although Canada does not have a standalone crypto tax regime, several CRA positions and interpretations directly affect digital asset firms. These include:
For firms with cross-border operations, international tax treaties, permanent establishment rules, and transfer pricing standards may apply. Companies expanding into Canada should evaluate these factors early to avoid unexpected liabilities during audits or regulatory reviews.
Canadian MSBs dealing in virtual currencies are required to implement ongoing due diligence measures, ensuring they understand who their customers are, the nature of their activities, and the risks they present. This process must be supported by internal policies and remain demonstrable during a FINTRAC examination.
MSBs must verify the identity of all clients using acceptable methods, including government-issued ID or dual-process verification for remote onboarding. Clients are assigned a risk classification that determines the level of monitoring required. Higher-risk customers demand increased scrutiny and, where applicable, Enhanced Due Diligence measures.
FINTRAC mandates secure and comprehensive retention of documentation demonstrating due diligence efforts, including:
These records must be maintained for the required retention period, generally five years, and be accessible for regulatory inspection.
Registering and operating a crypto-focused Money Services Business in Canada is relatively cost-efficient compared to other regulated jurisdictions. However, applicants should budget not only for the initial registration but for the systems, personnel, and audits required to maintain FINTRAC compliance on an ongoing basis.
While exact figures vary based on business model, transaction volume, and technology choices, the cost structure for most entrants falls into three main categories: registration, operational compliance, and recurring supervisory expenses.
FINTRAC does not charge an application or license fee, making Canada one of the few major markets where regulatory entry is not tied to a government tariff. However, businesses should expect to incur setup costs related to preparing a compliant registration package, such as:
Most MSBs spend between USD 10,000 and 40,000 in initial professional and infrastructure costs to reach registration readiness, depending on internal capabilities and complexity.
| Cost Category | Typical Range (USD) | Notes |
| FINTRAC application fee | 0 | No government charge |
| Legal & regulatory consulting | 5,000 – 20,000 | Depending on the business model and complexity |
| AML/ATF program development | 2,500 – 10,000 | Policies, risk assessment, internal controls |
| Corporate setup & filings | 1,000 – 5,000 | If forming a new Canadian entity |
| Technology setup (KYC / compliance tools) | 1,500 – 10,000 | Varies based on vendors and needs |
| Total initial investment | 10,000 – 40,000 | Average for most MSB applicants |
Once registered, FINTRAC expects continuous investment in compliance infrastructure. The principal ongoing expenses generally include:
Annual recurring costs for a typical digital asset MSB often range from USD 20,000 to 100,000+, with larger operations incurring significantly higher spend due to higher transaction volume, more complex risk exposure, and multiple product lines.
The FINTRAC registration process is comparatively fast by global standards. Most applicants can expect:
In total, most crypto MSBs can achieve full operational readiness within approximately 6 to 12 weeks, assuming governance documentation and compliance infrastructure are prepared proactively.
In practice, Canada offers one of the most accessible regulatory pathways for crypto businesses in developed markets. Registration costs are heavily driven by professional services and compliance infrastructure rather than government fees, and timelines are relatively fast for companies that prepare documentation and systems correctly from the start. With realistic budgeting and a structured approach, most MSBs can move from planning to full operational launch in a matter of weeks rather than months.
Canada stands out as one of the most mature and transparent jurisdictions globally for operating digital asset and fintech businesses. The regulatory framework is clearly defined, compliance expectations are published and consistent, and the market benefits from a strong reputation among banks, institutional partners, regulators, and international counterparties. However, the same clarity comes with a price: regulatory oversight is active and ongoing, and businesses must budget for monitoring, reporting, and governance obligations that increase as operations scale.
The following section examines both sides of operating a cryptocurrency MSB in Canada, highlighting the key benefits and challenges that companies should consider when considering obtaining a cryptocurrency license in Canada.
Stable Regulatory Environment
Canada provides a well-defined framework for crypto MSBs, allowing businesses to understand obligations in advance and operate with confidence.
Strong International Reputation
Businesses registered in Canada benefit from enhanced credibility, smoother banking relationships, and greater trust from partners and institutional clients.
Supportive Fintech Climate
The market offers pro-innovation conditions, broad digital adoption, and clear rules without requiring capital deposits or banking licenses.
Efficient Entry Timeline
With no government licensing fee and a streamlined registration process, well-prepared companies can become operational within 6–12 weeks.
High Compliance Expectations
MSBs must maintain real, ongoing AML programs, reporting processes, and risk assessments; compliance is continuous, not procedural.
Active Regulatory Oversight
FINTRAC conducts inspections and audits, and companies must be able to prove policies are implemented and effective.
Complex Tax Environment
Multiple tax rules, provincial differences, and cross-border activities require strong financial accounting and early tax planning.
Banking and Payments Challenge
Some financial institutions apply conservative onboarding standards, leading to extended due diligence and limited service availability for newer operators.
Obtaining a crypto license in Canada requires early compliance planning and recognizing that regulatory obligations apply before operations start. Companies that treat FINTRAC registration as a full operational build typically gain faster approvals, smoother banking onboarding, and fewer regulatory corrections later.
Many businesses delay or complicate their market entry by making avoidable mistakes. Frequent issues include:
Registering as a crypto Money Services Business (MSB) in Canada requires a detailed regulatory preparation, a comprehensive AML/ATF compliance framework, and operational systems that meet FINTRAC’s expectations from day one. Gofaizen & Sherle provides full-cycle support to help applicants build a compliant and audit-ready digital asset operation in the Canadian market.
How we assist
We assist in establishing the appropriate Canadian corporate structure, including incorporation, shareholder arrangements, and corporate governance design.
Our team manages the full registration process, from application preparation and submission to communication with the regulator throughout the review.
We develop the required compliance infrastructure, including tailored AML/ATF policies, written risk assessments, and employee training frameworks.
We help clients select and deploy essential tools for regulatory readiness, including KYC/identity verification and transaction monitoring systems.
Our team provides continued assistance with regulatory correspondence, FINTRAC examination preparation, and policy updates as the business evolves.
With Gofaizen & Sherle, digital asset businesses strengthen the quality and regulatory credibility of their MSB registration, enabling them to accelerate market entry and operate confidently within Canada’s established framework.
Want to apply for a crypto license in Canada? Write to us at info@gofaizen-sherle.com — our team will be happy to provide you with comprehensive advice and support.
Author
Find the right Legal Expert for your business
Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.
Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.
Send welcome message
