On-shore VASP in Canada

VASP: FINTRAC MSB registration (2-4 weeks) + provincial Restricted Dealer registration via CSA (6-18 months). Foreign platforms serving Canadians must register or face enforcement. Binance exited Canada rather than comply.

EXCHANGE: MSB (FINTRAC) + Restricted Dealer or Marketplace registration (provincial). Pre-registration undertakings prohibit margin trading and restrict altcoin offerings. $50K-$100K minimum capital for restricted dealers.

CUSTODY: Qualified Canadian custodian required for registered platforms. Client asset segregation mandatory.

FINTRAC — AML/CFT, MSB registration, transaction reporting

CSA — Provincial securities regulation — crypto trading platform registration (Staff Notice 21-327)

Proceeds of Crime (Money Laundering) and Terrorist Financing Act (2000) — AML/CFT, MSB registration

CSA Staff Notice 21-327 (2020) — Crypto trading platform registration requirements — aggressive enforcement since 2021

CSA Staff Notice 21-327: Guidance on Securities Legislation for Crypto Asset Trading (via BCSC or CSA sites).

All registrants must maintain minimum capital and insurance based on registration category and business activities; non-IIROC firms require CAD 25,000 to CAD 100,000 depending on category

All registrants must designate a Chief Compliance Officer (CCO) approved by the regulator who must complete the Exempt Market Products Course (EMPC) or equivalent plus CCO training

Regulators expect CCOs to have relevant industry experience, typically 3-5 years, with direct access to board/senior management and authority to implement compliance changes

Registration assessment includes evaluation of business model, capital adequacy, compliance infrastructure, and individual fitness, with multiple rounds of questions and potential in-person or virtual meetings

Registration framework is established through National Instrument 31-103 (NI 31-103) — Registration Requirements, Exemptions and Ongoing Registrant Obligations

Registration forms and filing requirements are governed by National Instrument 33-109 (NI 33-109)

The Canadian Securities Administrators (CSA) coordinate provincial regulators through a passport system

The ultimate authority for licensing requirements rests with each provincial securities commission

Anyone in the business of trading securities or advising clients on securities must be registered with the securities regulator in each province or territory where they do business, unless an exemption applies

Obligations: Registered VASPs are subject to a range of compliance obligations, including:

Registration: Registering with FINTRAC.

Record Keeping: Maintaining records of transactions, client identification, and compliance reports.

Client Identification: Verifying the identity of clients.

Reporting: Reporting suspicious transactions, large cash transactions ($10,000 CAD or more), and electronic funds transfers ($10,000 CAD or more).

Compliance Program: Developing and implementing a comprehensive compliance program, including risk assessments, policies and procedures, and ongoing training.

Implementation: The "Travel Rule," based on Financial Action Task Force (FATF) Recommendation 16, officially came into force in Canada with amendments to the PCMLTFA in June 2021.

What it entails: It requires VASPs (like other financial institutions) to obtain, hold, and transmit specific originator and beneficiary information with transfers of virtual currency (similar to wire transfers). For transactions equal to or greater than $1,000 CAD, VASPs must:

Obtain Information: Collect names, addresses, and account numbers (or unique transaction identifiers) for both the sender (originator) and receiver (beneficiary).

Send Information: Transmit this information to the beneficiary institution.

Receive Information: Receive this information from the originator institution.

Travel Rule adopted — threshold: CAD 10,000 (reporting threshold)

Sending VASPs must include required PII (originator/beneficiary name, address, account/reference number) with transfers.

Receiving VASPs must take reasonable measures to obtain missing information, with risk-based policies for allowing, suspending, rejecting transactions, or follow-up actions.

Canada has introduced specific reporting requirements for cross-border crypto transactions, including those involving non-custodial/self-hosted wallets, under Form T1135 and the upcoming 2025 Crypto-Asset Reporting Framework (CARF).

VASPs must also meet broader record-keeping and reporting under PCMLTFA.

Regulations: Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (e.g., para 124.1(1)(a))

Requirement: Entities dealing in virtual currency are categorized as money service businesses (MSBs) or foreign money service businesses (FMSBs) under the PCMLTFA. This means any person or entity operating in Canada that offers services of virtual currency exchange or transfer, and meets certain thresholds, must register with FINTRAC as a "Virtual Asset Service Provider" (VASP).

Current Status: As of April 2026, the Travel Rule is fully in force, and FINTRAC expects compliance. While practical interoperability solutions among VASPs for seamless data exchange continue to evolve globally, Canadian VASPs are required to implement reasonable measures to comply with the information collection and transmission requirements.

PCMLTFA – Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations: https://laws-lois.justice.gc.ca/eng/regulations/SOR-2020-101/index.html (Key amendments came into force June 2021)

Evidence fact ca.tax not found (may have been renamed).

Businesses/Exchanges: Report crypto income as business income; Canadian exchanges must report user transactions to CRA. Use ACB for capital property.

Ongoing Focus on Unregistered Platforms: Securities regulators continue to target platforms operating in Canada without registration. This often results in cease trading orders, financial penalties, and requirements for platforms to either register or exit the Canadian market.

Many international crypto trading platforms that previously operated without registration have entered into pre-registration undertakings (PRUs) with provincial commissions, which are formal agreements required to continue operating while pursuing registration, rather than post-hoc settlements for past non-compliance.

Examples of such actions have included:

Bybit: In March 2023, the OSC reached a settlement with Bybit, requiring the platform to pay $2,468,982 and provide an undertaking that it would not operate in Ontario without registration.

KuCoin: In June 2022, the OSC obtained orders against KuCoin (Mechbit Technology Ltd.) permanently banning it from participating in Ontario's capital markets and requiring it to pay an administrative penalty of $1,650,000 and $99,754 for costs.

Binance: Following a pattern of non-compliance, Binance entered into an undertaking with the OSC in December 2022 to cease all operations in Ontario. Later, in May 2023, the AMF imposed an administrative monetary penalty of $2.25 million on Binance for operating an unregistered platform and offered non-compliant derivatives in Quebec.