DISCLAIMER: The term “cryptolicense” in this text refers to a license to operate as a virtual currency service provider, which in Canada falls under the definition of “money service businesses” (“MSBs”). The use of the term “cryptolicense” is intended solely to simplify the text for the clients and visitors of the website.
Canada became a pioneer and paved the way for the rest of the world by being the first to classify cryptocurrency platforms as “money services businesses” in the context of financial regulation. Since 2014, this country has implemented laws prohibiting any activity related to money laundering and terrorist financing, demonstrating a strong commitment to combating illegal financial transactions.
The licensing process in Canada is regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the government body responsible for enforcing anti-money laundering and anti-terrorist financing legislation. Cryptocurrency companies are required to register with FINTRAC, undergo a thorough audit and demonstrate that they have robust policies, procedures and controls in place to prevent illegal activity.
Today, Canada is considered to be a well-developed and respected jurisdiction with relatively loyal tax rates, which creates a favorable environment for doing business. That is why such well-known companies as Newton, NDAX, BitBuy, Wealthsimple Crypto, Coinberry, Crypto.com, Coinsquare and Coinsmart have chosen Canada as a place to register their operations. This clearly demonstrates the attractiveness of the country for participants in the cryptocurrency industry.
Canada has been an innovator in legal reforms regarding providers that provide services related to cryptocurrencies and is a highly reputable developed jurisdiction
Key Numbers about Cryptolicense in Canada
12 weeksaverage term of starting new project |
15%federal corporate income tax (CIT) rate |
nominimal contribution for share capital |
0%withholding Tax (WHT) rate for residents |
noapplication fee for cryptolicense |
33%federal personal income tax (PIT) top rate |
Legal Opinion about Cryptolicense in Canada
Ganna Voievodina
Manimama
|
CEO
“For companies operating in the financial sector, obtaining a cryptolicense in Canada is mandatory. This cryptolicense ensures regulatory compliance, facilitates market entry in North America and improves operational efficiency. Startups and established companies both can benefit from the stability and opportunities it provides. Let our legal experts guide you through the process of obtaining a cryptolicense in Canada to ensure your success in the financial landscape. Contact us today to begin the licensing process.”
Types of Activities with a License in Canada
Foreign exchange dealing
carrying out operations on exchange of one type of currency for another (for example, USD to CAD exchange).
Issuing or redeeming money orders, traveller's cheques or anything similar
your business issues or redeems money orders, travellers' cheques or other similar negotiable instruments.
Crowdfunding platform services
the provision and maintenance of a crowdfunding platform for use by other persons or entities to raise funds or virtual currency for themselves or for persons or entities specified by them.
Dealing in cryptocurrency
this includes both cryptocurrency exchange and cryptocurrency transfer services. Cryptocurrency exchange services include exchanging: funds for cryptocurrency, cryptocurrency for funds, or cryptocurrency for another cryptocurrency. Cryptocurrency transfer services include: transferring cryptocurrency at the request of a client, or receiving a transfer of cryptocurrency for remittance to a beneficiary.
Remitting or transmitting funds
remitting or transmitting from one person or entity to another using an electronic funds transfer network or any other method such as Hawala, Hundi, Fei ch'ien, and Chitti.
Benefits of Obtaining a Cryptolicense in Canada
Regulated environment:
- Companies with a cryptolicense are more reliable and secure, which increases trust from customers and partners.
- Clear regulations reduce the risk of sudden changes in legislation, which provides predictability for businesses.
International Recognition:
- Canada is known for its strict but fair regulation, which contributes to international recognition and trust.
- Cryptolicense facilitates international partnerships and access to global markets.
Rights Protection:
- Licensed companies can expect their rights to be protected under the Canadian legal system.
- Established mechanisms with regulators protect against misconduct and facilitate dispute resolution.
Innovation ecosystem:
- Canada actively develops technology parks and startup incubators, creating a favorable environment for innovation.
- There are various grants and support programs for blockchain projects and cryptocurrency companies.
Our Services
Popular package
Company Incorporation
- Company name of your choice
- Company formation in Canada
- Apostilled corporate documents
- Local virtual office for 1 year
- Registered address for 1 year
Cryptolicensing Stage
- Legal support within the process of obtaining the cryptolicense
- Individual business plan with 3 scenario
- Individual AML/KYC policies
- Registration of the activities within FINTRAC
- Handling the communication with FINTRAC
Other Services
- Payment account in EMI
- Opening a banking account
- Website documents
- Legal opinion for VASP activities
- Legal opinion on token issuance in EU and Canadian market
Our Experts in this Area
Step by Step Description
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Step 1. Planning and strategizing
It is necessary to define the purpose of the company and the services our team will provide. We will provide the following information:
- optimal amount of share capital
- corporate structure
- applicable laws and regulations
- the application procedure and the types of activities for which a license should be granted based on the business model
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Step 2. Company registration
Applying for registration of the company in the Canadian Registry of Companies. After successful registration, the client receives:
- certificate of company registration
- Memorandum and Articles of Association of the company
- other corporate documents of the company
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Step 3. Obtaining a business number and registering with the tax office
Obtaining a business number is subject to guidelines from the Canadian Revenue Agency. Having obtained a business number and appropriate licenses (if applicable), the company must be registered with the Canadian Revenue Office, as all companies in Canada are subject to accounting and tax obligations
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Step 4. Obtaining of the cryptolicense
We will prepare a business plan for three years and draft mandatory procedures and policies that licensed companies must have. These are anti-money laundering policies, risk assessment procedures, internal control and audit rules. It will also be necessary to hire a specialist responsible for compliance and financial monitoring, since his candidacy will needs to be agreed with FINTRAC
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Step 5. Preparation for opening bank and trading accounts, drafting the documentation
Once the above steps are completed, you need to prepare all the necessary documents for the company's website, including the terms of service, privacy policy and other documentation, without which it is virtually impossible to do business and open accounts. We also can provide services for payment, trading and exchange accounts, as well as any additional legal services that a client needs
Understanding Canadian Requirements
Obtaining a cryptolicense is mandatory for companies that want to engage in activities related to cryptocurrencies
Companies that want to engage in cryptocurrency-related activities are required to obtain a license from FINTRAC and comply with a number of requirements, such as:
- filing reports with FINTRAC
- record keeping
- KYC and compliance
A MSB is an individual or legal entity with a place of business in Canada that provides at least one of the following services:
- operations with foreign currency, i.е. conducting transactions in which one type of currency is exchanged for another
- transfers of funds, including between individuals, legal entities, including through the network of electronic money transfers, i.e. transfer of funds from one person or entity to another using an electronic money transfer network or any other method such as Hawala, Hundi, Fei Chien, Chitti
- issuance or redemption of cash and traveler's checks or other similar negotiable instruments, with the exception of checks payable to a specified individual or legal entity
- operations with cryptocurrencies, i.e. cryptocurrency exchange and cryptocurrency transfer services
Requirements for Obtaining a Cryptolicense in Canada
To obtain a cryptolicense in Canada you need to have at least one shareholder, an AML officer and comply with AML/KYC regulations
The following mandatory requirements must be met in order to obtain a cryptolicense and operate in Canada:
- have a detailed business plan
- have the necessary AML/CTF policies
- share capital - no mandatory requirements
- provide passport, address, resume of founder (Canada is not a party to the Hague Convention, so legalization of foreign documents is required)
- no requirements for a local director
- appoint an AML officer who may be located outside of Canada
- prepare founding documents, memorandum and articles of association of the company
Taxes in Canada
In Canada, cryptocurrencies are taxed at the federal and provincial levels, and all income from cryptocurrency transactions must be reported
- Rate: 15% federal, plus provincial/territorial rates ranging from 8% to 16% (not deductible for federal CIT purposes). Combined rates range from 23% to 31%
- Who pays: resident and non-resident corporations carrying on business in Canada
- Taxable income: profits earned from business activities in Canada
- Filing deadline: six months after the company's taxation year end
- Payment deadline: instalments throughout the year, final payment six months after year end
- Rate: varies depending on the type of payment and recipient's residency. Generally 25% for non-residents, but can be reduced by tax treaties
- Who pays:payers of certain types of income to non-residents, such as royalties, dividends, and interest
- Filing and payment deadline: Generally, within 15 days of the payment date
- Rate: 50% of capital gain included in income and taxed at regular income tax rates (individual or corporate)
- Who pays: individuals and corporations disposing of "taxable Canadian property," including real estate, business assets, and some shares
- Holding period: no requirement
- Filing deadline: same as income tax return due date (April 30 for individuals, six months after year end for corporations)
Canada is a federation and consists of 10 provinces and 3 territories. Therefore, all personal and legal entity taxes are levied at both the federal (national) and provincial (local) levels.
FINTRAC considers cryptocurrencies to be commodities, so transactions with them are treated as commodity exchanges. Since 2013, FINTRAC has started taxing cryptocurrency transactions as capital gains or business income under the Income Tax Act.
When cryptocurrencies are taxed as business income, 100% of the income is taxed, capital gains are only taxed at 50%. At the same time, taxpayers must report the full amount of income received from cryptocurrency transactions.
Frequently Asked Questions
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What are the basic requirements to obtain a cryptolicense in Canada?In Canada, companies engaged in cryptocurrency activities must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and meet strict anti-money laundering and anti-terrorist financing requirements.
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Are cryptocurrency exchanges subject to licensing?Yes, companies providing cryptocurrency exchange services must also be licensed and comply with regulatory requirements in Canada.
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What documents must be submitted to license a company?Some of the basic documents include the company's certificate of incorporation, director and shareholder information, AML/CTF policies, KYC policies, and many others.
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What is Canada's policy on cryptocurrency regulation?Canada strives to create a favorable and safe environment for the cryptocurrency industry by establishing clear rules and requirements to ensure transparency and combat illegal transactions.
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What are the benefits of licensed cryptocompanies in Canada?Licensed cryptocompanies increase customer confidence, are able to legally conduct business, and have access to banking services and other financial instruments.
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How long does it usually take to obtain a cryptolicense in Canada?The process can take up to several months depending on the complexity of the business, preparation of documents and the speed at which the regulator reviews the application.
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Which Canadian provinces are the most popular among cryptocurrency companies?The most popular provinces are Ontario, British Columbia, where most cryptocompanies and exchanges are concentrated.
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Is a separate license required for each type of cryptocurrency activity?No, one license usually covers different activities such as exchanges, transfers and other cryptocurrency transactions.
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Can a cryptolicense in Canada be revoked or suspended?Yes, the regulator has the right to suspend or revoke a license in case of breach of requirements, non-compliance with regulations or suspected illegal activities.
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Do licensed cryptocompanies have to comply with reporting requirements?Yes, companies are required to submit regular reports on their activities, transactions and meet other reporting requirements to maintain their license.
Semen Kaploushenko
"Manimama OU is perfect partner. Reliability and quality - all of them and more we experienced while was obtaining MSB License".
Maksym Kuzma
"Manimama OU is a great law firm. We did not expect the Canadian MSB will be so easy for us".
Yuriy Soshenko
"Manimama OU made the crypto licensing process surprisingly smooth. Their efficient and knowledgeable team simplified everything for our crypto exchange".
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