Summary of "Crypto Regulation in Canada 🇨🇦 | AMLBot Webinar"

Summary of "Crypto Regulation in Canada 🇨🇦 | AMLBOT Webinar"

This webinar focused on the current landscape of cryptocurrency regulation in Canada, highlighting the regulatory framework, licensing requirements, compliance expectations, and practical guidance for crypto and fintech businesses considering Canada as a base of operations.

Main Financial Strategies, Market Analyses, and Business Trends

Registration-Based Regulatory System Canada employs a registration-based system for crypto and fintech businesses, contrasting with license-based systems in jurisdictions like the UK and EU. This system allows faster market entry with lower initial barriers, making Canada attractive for startups and smaller firms.
Key Regulatory Bodies and Frameworks
- FINTRAC (Financial Transactions and Reports Analysis Centre of Canada): Federal AML regulator overseeing MSB (Money Service Business) registrations, focusing primarily on anti-money laundering and terrorist financing compliance.
- Bank of Canada: Regulates Payment Service Providers (PSPs) under the Retail Payments Activities Act (RPA), focusing on safeguarding client funds and supervising payment systems.
- Provincial Regulators: Quebec has a specific MSB licensing regime separate from the federal registration; other provinces may follow.
- Canadian Securities Administrators (CSA) & Canadian Investment Regulatory Organization (CIRO): Oversee securities regulations, including crypto trading platforms, which must register as investment or restricted dealers under provincial securities laws harmonized nationally.
Differentiation Between Business Types and Licensing Needs
- Crypto businesses that do non-custodial crypto-to-crypto trades generally only require MSB registration with FINTRAC.
- Custodial platforms holding client assets (wallets or fiat) typically fall under securities regulations and/or PSP licensing and require more extensive registration and compliance.
- Crypto-to-fiat exchanges or platforms holding client fiat funds must register as PSPs with the Bank of Canada.
- Offering crypto assets considered securities triggers additional securities regulations and requires registration with provincial securities regulators.
Stablecoins and ICOs
- Stablecoins like USDC are widely accepted and not generally classified as securities if structured properly.
- Issuers of stablecoins must register with securities regulators if offering to Canadian consumers or listing on Canadian platforms.
- ICOs have been regulated since 2017-2018; companies must consult legal experts to navigate securities laws and potentially register or seek exemptions for offerings.
Banking and Payment Infrastructure
- Canadian banks and payment service providers offer operating accounts, settlement accounts (for client funds), and cross-border transaction services.
- Opening bank accounts for crypto businesses with only MSB registration is possible but can be challenging; PSP or securities licenses ease banking access.
- There are multiple tiers of banking relationships, and realistic expectations are needed for startups compared to large established firms.
Compliance and AML/KYC Tools
- AMLBOT is highlighted as an effective on-chain screening and compliance tool for transaction monitoring, regulatory reporting, and risk assessment.
- The FATF Travel Rule is mandatory for Canadian crypto businesses, with no threshold exemptions.
- Ongoing regulatory scrutiny and audits by FINTRAC are increasing, especially regarding AML compliance and jurisdictional legitimacy of registered entities.
Advantages of Canada as a Crypto Hub
- Lower barriers to market entry due to registration-based system vs. costly and lengthy licensing in the US or EU.
- Access to a G7 market with a growing retail consumer base.
- Harmonized securities regulation across provinces via CSA and CIRO.
- Competitive and business-friendly regulatory environment, especially for startups.

Step-by-Step Methodology / Recommendations for Crypto Businesses in Canada

Initial Business Analysis
- Consult with legal and compliance experts to determine the appropriate regulatory category (MSB, PSP, securities dealer).
- Assess if the business model involves holding client assets (crypto or fiat) or only immediate delivery trades.
Registration and Licensing Process
- Apply for FINTRAC MSB registration if dealing with virtual currencies without custody.
- If holding client fiat or operating as a payment service provider, register under the Bank of Canada’s PSP regime (pending ongoing national review).
- If operating a crypto trading platform with custody, apply for provincial securities registration via CIRO.
- For ICOs or token issuance, engage securities regulators and seek exemptions or approvals as needed.
Compliance Implementation
- Implement AML/KYC processes using tools like AMLBOT for transaction monitoring and regulatory reporting.
- Ensure adherence to the FATF Travel Rule without exemptions.
- Prepare for periodic audits and regulatory reviews by FINTRAC and other bodies.
Banking Setup
- Identify suitable banking partners for operating and settlement accounts.
- Engage experts to navigate banking relationships and compliance requirements.
- Manage expectations on banking access based on business size and licensing status.
Ongoing Regulatory Engagement