Cryptocurrencies have been on the rise around the world and Canada is among the countries that have welcomed use of cryptocurrencies. The country has relatively liberal legal frameworks, and the relevant fintech environment graphically shows the country is conducive for those planning to start virtual currency platforms such as cryptocurrency exchanges. But working in the crypto space in Canada can only be done after adhering to the set legal and regulatory rules such as the need to obtain relevant crypto licenses. This article aims to explain the easiest way to obtaining a crypto license in Canada and getting a Canada crypto exchange license.
The first thing any Canadian needs to know about Crypto is its governing regulations.
Canada has crafted its laws governing cryptocurrency in a way as to allow innovation while still ensuring that consumers are safe from things like fraud and money laundering. Key regulatory bodies overseeing the crypto industry include:
1. Financial Transactions and Reports Analysis Centre of Canada (FINTRAC):
The Financial Transaction and Reports Analysis Centre of Canada, is an organization that analyses and supervises financial transactions to prevent money laundering and funding of terrorism. Exchanges and wallet providers – companies that offer services related to cryptocurrencies – are to become Money Services Businesses (MSBs) registered with FINTRAC.
2. Provincial Securities Regulators:
These provinces as well as several others have securities commissions that oversee cryptocurrency related businesses that provide investment products.
3. Canada Revenue Agency (CRA):
The CRA’s role is to monitor the level of tax compliance for the use and trading of cryptocurrencies as well as other related enterprises.
4. Bank of Canada:
As for the second research question, the Bank of Canada has a role in regulating the digital currencies and their impacts on the economy although Canada mostly regulates traditional financial system.
Licenses crucial for the crypto business in Canada
Crypto businesses operating in Canada typically require the following licenses or registrations:
1. A Money Services Business ( MSB ) License
Those entities through whose systems flow the purchasing, selling, or processing of cryptocurrencies, for example, as payments, must be an MSB registered with FINTRAC. The acquisition of this license guarantees goal conformity of anti-money laundering (AML) and counter-terrorism financing (CTF).
2. The agreement relates to the establishment of securities dealer registration.
For the business to undertake an Initial Coin Offering, the accept cryptocurrency or token as a security under the Canadian laws, then it will mean that it will have to register with the security commissions in the province of Canada.
3. Derivatives Trading License
Some companies providing derivative products related to the cryptocurrencies may require a new license under the provincial derivatives law.
Procedure of Crypto License in Canada
The process to obtain a crypto license in Canada is quite gradual. Here’s a comprehensive guide:
1. Get an Understanding of Nature of Business
Determine at which category your crypto business will fall; will it be an exchange, a wallet provider, a payment processor or any other entity. It may be that each type of business will need certain licenses.
2. Register your Business as Money Services Business (MSB)
Step 1: To do this you have to make an account on the FINTRAC official website.
Step 2: The other section to fill at the MSB registration form includes the nature, holding and undertakings of the business, ownership as well as compliance measures in place.
Step 3: Lastly, complete the application and make the necessary payments to the amount required.
Step 4: Adopt and monitor the compliance of an AML/CTF compliance program to provide records and report on suspicious activities.
3. Only if applicable the firm must obtain a Secure Securities Registration.
If your business offers securities or investment products, you’ll need to:
Seek the help of your lawyers as you try to establish whether your products fall into the category of securities.
Obtain the correct registration with the provincial securities commission including the OSC.
Submit a prospectus as well as a compliance plan.
4. Build a Compliance Program
Policies in relation to cryptocurrencies are highly compliant in the Canadian market. Your program should include:
Policies and procedures for Anti Money Laundering/Countering the Financing of Terrorism.
Employee training programs.
Systems used in tracking and reporting of transaction and related activities.
5. Obtain a Privacy Policy
Due to the sensitive customer data that crypto businesses deal with you need to adhere to the requirements of the Canadian PIPEDA law. Ensure that you come up with a proper standard operational procedure that is going to enhance the privacy of customers data.
. Interact with Provincial Regulators
If you are based in a particular province and conducting certain business activities, you will require the approval of the provincial authorities. To avoid nasty surprises and meet all the requirements submitted by these bodies, one needs to start communicating with them as early as possible.
Expenses to Secure a Crypto License in Canada
In general, Canada based cost of getting an exchange license depends on size of the business, its operations, and licensing fees it requires to pay. Key expenses include:
FINTRAC Registration Fees: Usually varies anywhere between CAD 1000 and CAD 10000.
Legal and Consultancy Fees: Consultation on compliance and registration with professional experts may cost anything between CAD 5000 – CAD 50000.
Technology Costs: Setting up safe and regulatory conforming environments for exchange, storage, and surveillance.
Employee Training: Expenditure on programs related to the identification of money laundering and financing of terrorism.
Issues with Getting a Crypto License
While Canada is crypto-friendly, businesses may face challenges, including:
1. Regulatory Complexity:
This they do through the numerous and complex federal and provincial laws that are always a challenge for the new firms.
2. High Compliance Costs:
To meet AML, securities, and privacy at the same time, there is just a huge investment that has to be made.
3. Market Competition:
This is because as the market grows deeper for cryptocurrencies in Canada there is always fresh entrants into the market that will compete with those established in the market.
4. Evolving Regulations:
Cryptocurrencies and other related products are still emerging, and rules and standards can be volatile, meaning that organizations will have to learn to shift constantly.
Advantages of running a Licensed Crypto Business in Canada
Despite the challenges, obtaining a crypto license in Canada offers several benefits:
1. Market Trust:
Licenced businesses have the ability to create confidence in the minds of customers and the investors.
2. Access to Financial Services:
Banks and payment processors are at more risks working directly with the licensees.
3. Global Expansion:
This is true since a Canadian license boosts the reputation of your business, and therefore you can easily penetrate into the other markets in the world.
4. Regulatory Support:
Canada’s regulators remain quite involved in the development of the crypto industry and participate in its further improvement and support.
Chapters Three and Four: Crypto Licensing Dynamics in Canada
Canada remains arguably the most friendly country in supporting the growth of the crypto industry. Key trends include:
1. Increased Adoption:
With this upward trend in the acceptance of cryptocurrencies, more players in the market are being witnessed.
2. Focus on DeFi and NFTs:
DeFi and NFT emerged from last year’s trends, and new tendencies which could be considered as the promising to regulate.
3. Strengthened AML Regulations:
Authorities are improving the settings of AML to combat new threats.
4. Central Bank Digital Currency (CBDC):
The Bank of Canada is developing a central bank digital currency, which can have an impact on the rest of the crypto-market.
Conclusion
It is therefore crucial to get a Canada crypto exchange license in order to operate in the competitive market. Canadian authorities should be commended for creating a favourable political environment in the(ConfigurationManager, 2019) crypto industry that enables crypto businesses after understanding and constructing an adequate compliance regime. Knowing the licensing process is crucial for defining a long term profitable model, whether one is entering a new exchange or expanding an existing one.
This has made Canada preferred by cryptocurrency entrepreneurs because of their friendly laws while possessing a strong regulatory framework. Despite this, anyone who has been able to obtain a license and operate a business in one of the world’s largest crypto hubs will understand that the benefits of doing so are well worth the hurdles and complexities involved in the process.
