Canadian crypto regulations: what you need to know in 2025

Canada remains one of the most stable and well-regulated jurisdictions for crypto businesses. The country has a unified federal reporting system through FINTRAC and a coordinated regulatory approach. However, the authorities are tightening requirements: crypto exchanges must either obtain MSB status or register as investment dealers, and multi-million-dollar fines are already being imposed for non-compliance. Despite this, the market continues to grow: more than 10% of Canadians own cryptocurrencies, and trading volumes on registered platforms have more than doubled over the past three years. In this article, we take a detailed look at the regulatory framework for crypto companies in Canada, when a securities dealer license is required, how to obtain registration status, and what to expect in 2025.

Who regulates the crypto market in Canada?

Canada has not introduced a separate Cryptocurrency Act. Instead, it has integrated digital assets into the existing financial system: anti–money laundering compliance is supervised by FINTRAC, crypto exchanges and tokens fall under the jurisdiction of CSA, dealer licensing is regulated by CIRO, and banking oversight is handled by OSFI. This approach makes the market transparent but requires businesses to be fully prepared from a legal and compliance standpoint.

FINTRAC: MSB registration and AML supervision

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the primary authority responsible for monitoring financial transactions and combating money laundering. Any company that exchanges, transfers, stores, or sells cryptocurrency on behalf of clients must register as a Money Services Business (MSB) or a Foreign MSB (if it operates outside Canada but provides services to Canadian clients).

A crypto company is required to:

1. Register as an MSB and disclose its beneficial owners;
2. Appoint a Compliance Officer and implement an AML policy;
3. Conduct client identification (KYC), including identity verification for transactions of 1,000 CAD or more;
4. Submit reports to FINTRAC: STR for suspicious transactions, LCTR for cash transactions of 10,000 CAD or more, and LVCTR for virtual currency transactions over 10,000 CAD;
5. Retain client and transaction records for at least five years.

Failure to comply may result in penalties of up to 500,000 CAD and prohibition from operating.

CSA: When cryptocurrency is treated as a security

The Canadian Securities Administrators (CSA) is an umbrella organization of all provincial securities regulators. It determines when a token is merely a utility asset and when it qualifies as a security (an investment product).

A token is treated as a security if:

• It is sold with the expectation of profit;
• Investors do not have direct control over the asset or project;
• The issuer promises income or capital appreciation;
• The exchange holds client assets and facilitates trading activities.

If these conditions apply, the platform must:

• Register as an investment dealer or restricted dealer;
• Sign a Pre-Registration Undertaking (PRU) committing to comply with CSA requirements;
• Meet the standards of NI 31-103 and NI 21-101 (capital, audits, client asset protection).

CIRO: Oversight of licensed trading platforms

After registration with the CSA, a crypto company falls under the oversight of the Canadian Investment Regulatory Organization (CIRO). CIRO requires:

1. Minimum capital (starting from 50,000 CAD for restricted dealers);
2. Liability insurance (fidelity bond);
3. Segregated accounts: client assets must be kept separate from company funds;
4. Mandatory audits and reporting on financial stability and cybersecurity;
5. Internal Control Systems and Risk Management Frameworks.

Banking supervision and OSFI

Even with MSB status, a crypto business cannot operate without a bank account. However, banks do not accept every applicant – the crypto sector is considered a high-risk sector. The Office of the Superintendent of Financial Institutions (OSFI) regulates banks and requires them to:

• Verify the source of clients’ cryptocurrency funds;
• Work only with companies registered with FINTRAC and, where applicable, CSA;
• Account for cryptoassets in capital and liquidity assessments;
• Implement digital and operational risk management systems.

If a crypto company lacks MSB registration or a transparent corporate structure, a Canadian bank will almost certainly refuse to open an account.

Registering as a Money Services Business (MSB)

In Canada, crypto businesses do not receive a licence the way they do in the EU. Instead, they are required to register with FINTRAC as a Money Services Business (MSB). This applies to exchanges, brokers, payment processors, custody providers and any projects that receive compensation for buying, selling or transferring cryptocurrency. If a company operates outside Canada but serves Canadian clients, it must obtain Foreign MSB status.

Registering with FINTRAC is only the first step. Once a company is added to the registry, it becomes a reporting entity under Canadian anti–money laundering regulations and is therefore required to implement internal controls, monitor transactions, collect client information and report suspicious activity.

Key obligations for MSBs include:

1. Appointing a Compliance Officer responsible for regulatory oversight and communication with FINTRAC;
2. Conducting KYC identity verification when opening accounts or processing transactions;
3. Reporting large and suspicious cryptocurrency transactions to FINTRAC;
4. Keeping client and transaction records for at least five years;
5. Regularly updating internal AML policies and compliance procedures.

Registration typically takes between 2 and 8 weeks. FINTRAC may request additional details on ownership structure, funding sources, business model or internal processes. Companies that register but fail to submit reports or implement real compliance systems risk fines or removal from the MSB registry.

When does a cryptocurrency company need a securities dealer's license (CSA)?

Not all crypto companies in Canada operate solely under MSB status. If a platform does more than exchange cryptocurrency – for example, if it holds client assets, issues tokens for investment purposes, or enables trading in cryptoassets that qualify as securities – it falls under the regulation of the Canadian Securities Administrators (CSA) and must obtain dealer status.

Pre-Registration Undertaking (PRU)

The CSA requires crypto platforms that fall within securities regulation to sign a Pre-Registration Undertaking (PRU) – a formal commitment to comply with regulatory requirements.
A PRU typically includes:

• Segregation of client funds from company funds (segregated accounts);
• Prohibition of margin trading without the appropriate licence;
• Custody of client assets only with a qualified custodian;
• Clear disclosure of risks to users.

Many crypto exchanges continue operating in Canada under this interim PRU status while their full licence applications are under review.

When is investment dealer or restricted dealer status required?

A crypto company must obtain formal dealer registration if it manages client assets or provides access to trading tokens that are classified as securities. In this case, it must:

• Register as an investment dealer (full licence) or restricted dealer (limited scope of activities);
• Become a member of CIRO (Canadian Investment Regulatory Organization);
• Meet ongoing requirements related to capital adequacy, audits, insurance and regulatory reporting.

Asset custody, custody services and security of client funds

Canadian regulators pay particular attention to how crypto companies safeguard client assets. The goal is not only to prevent money laundering but also to protect users from asset loss caused by hacking, insolvency or mismanagement. If a platform holds client cryptocurrency (even temporarily), it must maintain secure infrastructure and comply with CSA and CIRO requirements. This is why regulators favour models where client assets are fully separated from company funds.

Asset storage: custody vs. self-custody

Most crypto platforms in Canada are required to use a qualified custodian, typically a licensed trust company or regulated asset custodian. This differs from self-custody, where users retain control of their own private keys.

Minimum asset custody requirements include:

• Using cold storage for the majority of client funds;
• Maintaining segregated accounts, where client assets cannot be mixed with company funds;
• Keeping detailed records of wallet balances and all transactions;
• Undergoing regular audits by independent third parties.

Insurance and risk management

The CSA and CIRO require platforms that hold client assets to provide not only technological protection but also financial safeguards. This is achieved through insurance or dedicated reserve funds.

Common mechanisms include:

• Fidelity bonds – insurance against internal fraud or employee misconduct;
• Crime or cyber insurance – protection against hacking and cyberattacks;
• Liquidity or reserve funds to compensate users if a custodian becomes insolvent or access to assets is lost.

IT security and audits

Regulators require crypto companies to conduct regular technical and cybersecurity assessments. This applies not only to licensed investment dealers but also to MSBs that hold client funds.

Internal security policies must include:

• Strict control over access to private keys;
• Multi-signature and two-factor authentication;
• Encrypted backups and offline key storage;
• Annual external IT audits and penetration testing.

How cryptocurrency companies can stay compliant: a practical guide

Even if a crypto business is officially registered in Canada, this does not protect it from inspections by FINTRAC or the CSA. Registration is only the first step. To be considered truly compliant, a company must build an internal control system, document all processes, and operate strictly in line with regulatory requirements.

Minimum steps every crypto company must take:

1. Obtain MSB or Foreign MSB registration and keep company and beneficial ownership information up to date.
2. Develop and implement an AML/KYC policy, appoint a Compliance Officer, monitor transactions, and train staff.
3. Determine whether the business falls under CSA jurisdiction, and if so – sign a Pre-Registration Undertaking (PRU) or begin the process of registering as an investment dealer or restricted dealer.
4. Ensure that client assets are kept separate from company funds, use a licensed custodian and secure cold storage.
5. Submit all required reports to FINTRAC, including STRs, LVCTRs, LCTRs, and reports of large or suspicious crypto transactions.
6. Maintain a proper corporate and tax structure: Canadian entities must keep financial records and report taxable income.
7. Document everything. During inspections, FINTRAC and the CSA do not evaluate how a system «generally works» – they check whether policies and procedures are formally documented.

The most common mistake among crypto startups in Canada is registering as an MSB without establishing a real compliance system. While the company is small, this often goes unnoticed. But once transactions grow, users become active, or regulators send a request, the absence of proper records, policies or a Compliance Officer quickly leads to fines or account suspension.

How can Key2Law help crypto businesses in Canada?

Operating with cryptoassets in Canada is impossible without strict compliance with FINTRAC, CSA and banking regulations. The Key2Law team supports crypto companies at every stage of this process: from initial registration to ongoing regulatory compliance.

What we do:

• Register companies as MSB or Foreign MSB with FINTRAC, prepare documentation and disclose beneficial ownership information;
• Develop AML/KYC policies, internal transaction monitoring procedures, risk assessments and provide staff training;
• Support the submission of the Pre-Registration Undertaking (PRU) and obtaining investment dealer or restricted dealer status with CSA and CIRO;
• Assist in setting up legally compliant custody structures - selecting a custodian, implementing cold storage, segregated accounts and drafting agreements with service providers;
• Prepare companies for FINTRAC and CSA audits, respond to regulator inquiries and address compliance gaps before inspections take place;
• Advise on tax planning, corporate structuring, opening bank accounts and interaction with OSFI-regulated financial institutions;
• Assist foreign crypto projects operating in Canada, including Foreign MSB registration and documentation adaptation.

If you are entering the Canadian market or want to ensure full compliance with current regulations, the Key2Law team will help you do it efficiently, securely and without delays.