Canada MSB License
Money Service Business

Trading in Virtual Currency

When launching your fintech project and offering Virtual Currency Trading or Payment Services, it is imperative to obtain the necessary authorization. Among the various options available for registering your Virtual Currency Trade and commencing operations promptly, the Canadian Money Services Business (MSB) license stands out as a cost-effective and multi-alternative providing you several advantages.

Securing a Crypto or VASP license in any European Union (EU) country or in the United Kingdom can be an extensive and costly endeavor. The process, from the initial stages to the actual launch, often goes over a 6 months’ timeframe, considering preparing the required documentation, obtaining authorization from regulatory bodies, and setting up the basic infrastructure adds. This arduous process often compels new companies to seek alternative pathways to kickstart their fintech ventures more swiftly. That’s why MSB license in Canada still remains as an excellent option, inclusive for its short time frame 2 to 3 months to get registered with FINTRAC.

What a Canadian MSB License Can Offer You

Canada presents an attractive jurisdiction for several reasons, including its government’s flexible requirements for financial services companies, adherence to global regulatory standards, and a robust legal framework that ensures a high level of legal protection.

Canada boasts one of the world’s most reliable banking systems, having weathered the global financial crisis. It currently stands as the ninth-largest economy globally and fulfills all essential criteria, encompassing property rights, technology, innovation, taxation, corruption levels, securities market stability, bureaucracy, and investor protection.

Financial businesses catering to customers must align with Canadian laws to support government efforts in detecting criminal activity and combating money laundering. There are two categories of financial businesses obliged to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) regulations in Canada: the Foreign Money Service Business (FMSB) and the Money Service Business (MSB).

TBA & Associates provides professional assistance in obtaining a Canadian MSB license through a comprehensive turnkey solution, backed by a guarantee.

Services Offered by an MSB
(Money Services Business)

An MSB is a non-bank financial institution that facilitates a wide range of various financial activities, such as:

• Conducting services related to virtual currency, such as exchanging fiat currency for virtual currency, exchanging one virtual currency for another, transferring or receiving virtual currency, and operating or maintaining a crowdfunding platform for fundraising in virtual currency.

Providing at least one of the following MSB services to clients:

• Currency transactions
• Currency exchange transactions
• Funds transfers, including bank card transfers
• Facilitating financial transfers between legal entities or individuals
• Facilitating payments for bills, utilities, wages, mortgages, loans, and similar expenses (excluding payments solely for paying off debts while issuing payment instructions to the initial payee).
• Issuing or redeeming money orders, traveler’s checks, or similar negotiable instruments (except for cashing checks written to specific individuals or exclusively selling traveler’s checks from another issuer).
• Maintaining a presence in Canada, possessing a physical office in the country, hiring employees and agents within Canada, or establishing a branch office.

Moreover, your company may be classified as an MSB under the following conditions:

• Holding a license or registration pertaining to one or more of the aforementioned services.
• Attracting customers to these services through advertising, whether in the media, on the internet, through outdoor campaigns, and more.
• Explicitly advertising your participation in these services through various means, such as newspapers, television, internet listings, or outdoor promotions.
• Not advertising these services but offering financial remittance services, foreign exchange transactions exceeding $1,000 in a single transaction with a single customer, or services involving money order and traveler’s check issuance and redemption exceeding $1,000 per transaction with a single customer. (A single transaction may consist of multiple transactions, each less than $1,000, as long as the cumulative value reaches or exceeds $1,000.) Furthermore, you must pay taxes on profits derived from any of these services.

Trading in Virtual Currency

This encompasses the provision of virtual currency exchange and transfer services.

Virtual currency exchange services encompass the following:

• Swapping cash funds for virtual currency.
• Exchanging virtual currency for cash funds.
• Converting one virtual currency into another.

The services related to transferring virtual currency as a payment instrument include:

• Sending virtual currency as per the client’s request.
• Receiving virtual currency transfers for onward transmission to the intended recipient.

The recent legislative changes in Canada, which came into effect in early June 2020, have given the green light to crypto-exchanges and payment operators engaged with cryptocurrencies. These entities are now officially recognized as financial service providers.

Canada’s MSB License
Key Benefits and Advantages

Legal Compliance:
No deposit required.

MSB’s Good Reputation:
Fewer complaints.

Time-Efficient:
The process of obtaining an MSB license is relatively swift.

Flexibility:
The ability to adapt and evolve.

International Expansion:
Opportunities for global growth.

Registering your MSB Entity

Before commencing operations in Canada, it is essential to register your Money Services Business (MSB) with FINTRAC. Even if your MSB is registered at the provincial or territorial level, you must also register with FINTRAC.

Please note: As of June 1, 2021, regulatory amendments affecting all Reporting Entities (REs) subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations will be in force. While FINTRAC expects REs to comply with the amended Regulations, there will be flexibility in assessing and enforcing compliance regarding certain record-keeping and reporting requirements.

Registration Steps

Step 1
When establishing a company in Canada, you may select any province, with British Columbia being a suitable choice for non-residents. Here are some key requirements:

• Personnel: During the registration phase, it is necessary to appoint a Compliance Officer, preferably with prior experience in the financial sector.
• Beneficiaries: Details regarding the beneficiaries of the business, including information on their citizenship, non-criminal records, the source of their wealth, or any other requisite criteria.
• Company Name: It should consist of at least two words, with one describing the company’s primary business, such as “payments” or “money transfers.” Abbreviations are not accepted.
• Registered Address: At the registration phase, having a physical office is not obligatory. What the company needs is a legal address, which can be, for instance, the residential address of the director. In the majority of instances, it is advisable to opt for federal incorporation rather than provincial.
• Initial Capital: FINTRAC has not established a specific minimum requirement for initial capital. However, it is recommended to deposit and commit a certain amount as authorized capital to demonstrate a genuine commitment to business planning and development.
• Management: During the registration stage, appoint at least one director with experience in the financial sector.
• Compliance Reporting: A company registered with FINTRAC must complete reports, including information about suspicious transactions, electronic fund transfers exceeding specific limits, large cash transactions exceeding specific limits, and terrorist property, as part of their internal compliance program.

(Note: If needed, TBA & Associates can offer compliance officer services to meet the requirements.)

Step 2
This step includes an interview with a FINTRAC representative. You need to provide:

• The company name seeking the license.
• The legal (actual) address of the company
• Contact details of the company representative.
• A description of the services and activities the company intends to provide.

Step 3
For registration, you should submit the following information:

• Information about the company’s bank account.
• Details about your Compliance Officer.
• Staff headcount.
• Registration information (if your business is a corporation).
• Information about the owners of your MSB and senior management, including their names and dates of birth (for the company directors and individuals who own or control 20% or more).
• An estimate of the expected total annual transaction amount in U.S. dollars for each MSB service you offer.
• Detailed information about each branch.
• Details about each MSB agent.

Benefits of an MSB License in Canada

• No cash deposit is required, setting it apart from some EU EMI licenses, which mandate a significant capital amount.
• Canada boasts a highly reliable financial and banking system, with a conducive environment for business growth, making it an attractive destination for financial services.
• The process of obtaining an MSB license in Canada is relatively swift, taking only 2 to 3 months, compared to the longer timelines associated with certain European financial licenses.

Should you wish to establish a Money Services Business in Canada, we can provide comprehensive support, including assessing applicant qualifications, company formation, bank account setup, AML risk assessment, compliance officer recruitment, and more. We also offer legal and project services, project management, corporate concierge services, resident non-executive directors, compliance support, and more.

Timeline

TBA aims to complete your Canada company registration within one week of receiving the required documents. The business development team will create the business plan and AML/CFT policy within two weeks. Subsequently, the license application will be submitted to FINTRAC, with the license typically obtained within four weeks. Once the license is secured, TBA’s banking team will initiate corporate bank account setup, with the entire engagement typically concluding within 2 to 3 months.

How TBA Can Help You!

Established in 2009, TBA Associates boasts a dedicated business development team specializing in tailor-made wealth preservation and enhancement solutions. This expert team delivers tax-efficient structures to facilitate cross-border transactions.

The knowledgeable professionals at TBA Associates will guide you in making informed decisions while providing continuous support throughout the process. They can assist you in devising and executing strategies that enable you to manage your financial affairs with absolute confidentiality in an environment free from adverse tax implications.

Should you have any question or related matter you may need to discuss or clarify, do not hesitate to contact us.

Our Business Team will be more than happy and pleased to provide you free assistance, to assist you to properly reach your professional goals.