Obtaining a crypto license is a crucial step toward ensuring legal compliance for companies looking to operate in the Canadian cryptocurrency market. A crypto license in Canada allows corporations to legally buy, sell, and trade cryptos and provide related services. To streamline the process, working with a professional firm that offers turnkey solutions for the remote obtainment of a cryptocurrency license in Canada is highly beneficial. Key features to consider when selecting a firm include a comprehensive understanding of Canadian regulatory frameworks, fast turnaround times, and compliance with legal requirements. With the proper support, corporations can successfully navigate the process of obtaining a crypto license in Canada and confidently enter the thriving Canadian crypto market.
Advantages of a Crypto License in Canada
A crypto license in Canada can provide businesses with various advantages when entering the cryptocurrency market.
Legal compliance:
A crypto license allows businesses to operate legally within the Canadian regulatory framework, ensuring compliance with laws and regulations.
Credibility and legitimacy:
Acquiring a crypto license can augment a business’s credibility and legitimacy, rendering it more appealing to prospective patrons and associates.
Access to financial services:
A crypto license bestows enterprises the opportunity to gain entry to a more extensive array of financial amenities, encompassing banking and insurance services, that may have previously been inaccessible to them.
Tax benefits:
Tax benefits may be associated with having a crypto license, such as deducting expenses related to the cryptocurrency business.
Competitive edge:
Obtaining a crypto license in Canada can give businesses a competitive edge in a rapidly growing and innovative market.
Requirements for a Canada Crypto License
Canada has established legal provisions and regulatory frameworks to regulate the employment and commerce of cryptos within its territorial boundaries. To obtain a cryptocurrency license in Canada, businesses must comply with these regulatory frameworks. The standard requirements for obtaining a crypto license in Canada are:
Business registration:
Before applying for a Canada crypto license, businesses must register their company with the relevant provincial or territorial authorities.
AML and KYC compliance:
Businesses must abide by anti-money laundering (AML) and know-your-customer (KYC) regulations, which mandate the authentication of their patrons’ identities and necessitate the reporting of any dubious transactions.
Financial stability:
Businesses must demonstrate financial stability and solvency to operate sustainably.
Security measures:
Enterprises must possess robust security protocols to safeguard their clients’ funds and sensitive information.
Business plan and risk assessment:
Firms must provide a detailed business plan and a comprehensive evaluation of potential hazards, highlighting their operations, services, and risk mitigation policies.
Qualified personnel:
Businesses must have qualified personnel (Compliance Officer and Director) with relevant experience and expertise in the cryptocurrency industry.
Physical presence:
Businesses must open a physical office in Canada.
Good Standing status:
All founders, shareholders, and employees must be in good standing. Companies need to provide the regulator with certificates of non criminal record in the country of citizenship.
Types of Crypto Licenses in Canada
If you want to open a cryptocurrency business in Canada, a cryptocurrency license is required for legal activities. Companies with this type of license can perform the following financial transactions:
Currency exchange
Allows a firm to exchange crypto for crypto, crypto for FIAT, or vice versa for a commission.
Money transferring
Transfer funds and execute cross border transfers for individuals and businesses alike
Service packages for registration of Crypto License in Canada
- Incorporation of all services from the Advanced package
- Support in setting up a corporate account
- Inclusion of all Basic package services
- Assistance with company establishment
- Choice of company name
- Collection of corporate documents
- Coordination with the local financial authority
- Provision of a local AML Officer
- Appointment of a local Director
- Local Office
- Provision of a personal consultant offering tailored guidance
- Support in the application process for a cryptocurrency license
- Implementation of AML and KYC policies
Сonsultant
Eugen Fomin
Procedure for Obtaining the Crypto License in Canada
Obtaining a crypto license in Canada requires businesses to fulfill various legal and regulatory requirements. To help companies streamline this process, professional firms offer assistance with the application process. The procedure for obtaining a crypto license in Canada typically involves the following steps:
- Gathering a set of papers from the customer. This step involves obtaining essential information, such as KYC documents and business description. This helps to provide an initial set of documents needed to execute a power of attorney and establish clarity on the project’s scope and budget. Usually, it takes up to 2 weeks to collect all required papers.
- Creating a banking account. This step involves preparing notarized documents and conducting preliminary talks with the payment institution to initiate the account opening process. Usually, it takes up to 4-5 weeks. The result of successfully creating a banking account is the opening of a corporate account that complies with the requirements of the tax authorities and any relevant supervisory authorities, particularly in the case of virtual assets. It is essential to ensure that all necessary documents are in order and that any legal and regulatory requirements are met to avoid any potential issues or penalties down the line.
- The process of registering (unless there is a need to request clarification from the applicant after the initial submission). The process of registering for a crypto license typically involves submitting documents to FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) and takes up to 4 weeks.
- During the registration process, it may be necessary to lead the client and conduct negotiations with the regulator, providing full support throughout the entire process until registration is accomplished. This is important to ensure that all requirements are met and to avoid any potential issues or delays that could arise during the registration process.
- Registering a business in Canada. This process includes several steps, like choosing a name for the company and registering it under the approved name. The legal address of the company is also registered during this process. Other tasks involved in registering a business in Canada may include renting an office space and signing an agreement, determining the company’s share capital, and preparing a set of corporate documents certified by a notary. It is also essential to appoint employees with financial expertise to appropriately manage the company’s finances. These steps are crucial to successfully establishing and operating a business in Canada and may take up to 4-6 weeks.
- Preparatory work and registration procedures. Preparatory work and registration procedures involve several steps that take up to 2 weeks. They must be completed before applying for a license. These steps include preparing and adapting anti-money laundering/counter-terrorist financing (AML/CTF) documents for cryptocurrency company operations. In addition, there is a need to search for, employ, train, and adapt employees who will help the company operate within the legal framework of Canada. Once all of these steps are completed, an application for a license can be submitted, and the FinTRAC representative may request additional documentation.
- If no clarification is required from the applicant after the initial submission, the process can move forward, and the result of successful registration is obtaining a crypto license and the appearance of the company in the registry of licenses.
Cryptocurrency Regulation in Canada
Canada has implemented laws and regulations to govern the use and trading of cryptos within its borders. The regulation of cryptocurrency businesses in Canada falls under the purview of several regulatory bodies, including the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the Canadian Securities Administrators (CSA), and the Office of the Superintendent of Financial Institutions (OSFI).
FINTRAC is responsible for enforcing Canada’s anti-money laundering (AML) and counter-terrorist financing (CTF) laws and regulations, which includes licensing and regulating cryptocurrency businesses operating in the country. Crypto businesses that operate in Canada are required to register with FINTRAC and comply with their regulations, including customer identification and reporting requirements.
The CSA is an umbrella organization of Canada’s provincial and territorial securities regulators. They are responsible for regulating the securities industry in Canada, which includes overseeing crypto assets that are classified as securities.
The OSFI is responsible for supervising and regulating all Canadian financial institutions, including those that engage in cryptocurrency-related activities, such as banking and payment services.
To ensure compliance with applicable laws and regulations, the regulation of cryptocurrency enterprises in Canada is a collaborative effort between multiple regulatory bodies.
Regulations Governing Crypto Business in Canada
The Canadian government has implemented laws and regulations to govern the use and trading of cryptos within its borders. The common regulations include the following:
- Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations: Cryptocurrency businesses must comply with AML and KYC regulations, which require them to verify the identity of their customers and report any suspicious transactions.
- Registration and licensing: Cryptocurrency businesses may be required to register with or obtain a license from the relevant regulatory authority FINTRAC.
- Consumer protection: Cryptocurrency businesses must comply with consumer protection laws and regulations to ensure customers are not subjected to fraudulent or deceptive practices.
- Taxation: Cryptocurrency businesses must comply with tax laws and regulations, including reporting requirements and paying applicable taxes.
- Securities regulations: Depending on the jurisdiction, cryptocurrency companies that offer initial coin offerings (ICOs) or other securities-related services may be subject to securities regulations.
- Privacy laws: Cryptocurrency enterprises must conform to privacy statutes and regulations to safeguard their clients’ private data.
Taxation of Crypto Companies in Canada
In Canada, cryptocurrency companies are subject to taxation laws and regulations, which can impact their financial operations. The Canadian Revenue Agency (CRA) has guided how cryptos should be taxed, but the taxation of cryptocurrency companies can vary depending on the type of services offered.
Cryptocurrency businesses in Canada are required to report their cryptocurrency transactions and pay applicable taxes. The CRA considers cryptos a commodity, which means they are subject to capital gains taxes. If cryptocurrency is sold at a value greater than its initial purchase price, its profit is subject to capital gains tax. Likewise, the transaction is subjected to sales tax when utilizing a cryptocurrency to procure goods or services.
Crypto companies that mine cryptos are also subject to taxation laws. The CRA considers mining a business activity, meaning that income generated from mining is subject to income tax. Additionally, any expenses incurred during mining can be deducted from the income generated. Companies registered in British Columbia receive the most favorable tax regime. The taxation is as follows:
It is 0% of the income received for services outside Canada.
- 2% up to 300,000 CAD income
- 12% over 300,000 CAD income.
- All companies in Canada are also obligated to remit a federal tax of 15%.
FAQ about crypto license in Canada
What is a Canada crypto license?
As of March 2024, there is no specific “cryptocurrency license” in Canada, and a cryptocurrency license refers to the permission required for cryptocurrency businesses. Organizations that register as cryptocurrency companies must:
- undergo a registration process with FINTRAC, which oversees the activities of cryptocurrency companies;
- obtain a Money Service Business (MSB) license.
Obtaining this license is mandatory for both local companies and foreign cryptocurrency firms.
Why do I need a crypto license in Canada?
The MSB license in Canada allows companies to operate with Canadian dollars, foreign currencies, and cryptocurrencies both domestically and internationally. With this license, they can provide a wide range of services, including electronic payments, virtual currency exchange and transfer services, and crowdfunding platform services. This opens up opportunities for companies to expand their business and attract customers, including both individuals and legal entities, including international companies. In general, the Canadian MSB license ensures the legality of operations, customer confidence, and protection from regulatory issues.
How much does a crypto license cost in Canada?
There is no application fee to apply for an MSB license in Canada or to register a company with FINTRAC.
Who issues crypto licenses in Canada?
In Canada, money transfer business (MSB) licenses are issued by the Financial Transactions and Reporting Analysis Centre of Canada (FINTRAC). This is Canada’s financial intelligence agency, which is responsible for monitoring and detecting suspicious financial transactions to prevent money laundering and terrorist financing.
What are the requirements for obtaining a crypto license in Canada?
To obtain an MSB license in Canada, a company must register with FINTRAC, develop a compliance program, including AML/CTF policies and procedures, conduct risk assessments, perform customer record checks, maintain transaction records, report suspicious activity, and train compliance officers. The company must also have a physical office in Canada and a minimum of one director with economic experience.
How long does it take to get a crypto license in Canada?
The time to obtain an MSB license in Canada can vary depending on several factors, including the completeness of the documents submitted and the processing time by the regulatory authorities. Typically, it can take anywhere from 1 to 3 months to complete the registration process and receive approval for a license.
Can foreign companies apply for a crypto license in Canada?
Yes, foreign companies can apply for an MSB license in Canada. However, they must meet the same regulatory requirements as local companies. This includes registering with FINTRAC, developing and implementing a compliance program, conducting risk assessments, performing customer due diligence procedures, maintaining accurate records, complying with reporting requirements, and training staff on compliance issues. Foreign companies interested in operating as MSB in Canada should familiarize themselves with Canadian laws and ensure that they meet all requirements before applying for a license.