Set up Cryptocurrency Company in Canada

Tetra Consultants assist our international clients to set up cryptocurrency company in Canada. Our service package includes Canada company registration, corporate bank account opening, license application, recruiting quality employees and drafting of required AML/CFT documents.

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Set up cryptocurrency company in Canada: Introduction

Tetra Consultants assists our international clients to set up cryptocurrency company in Canada. Our team ensures that your Canada cryptocurrency company is compliant with all local regulations and can legally conduct business.

Under the regulations of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), companies that provide cryptocurrency exchange or cryptocurrency transfer services will be required to procure a Money Services Business (MSB) license in Canada. Both Canadian and foreign cryptocurrency companies that operate in Canada must register as a Money Services Business with FINTRAC and comply with FINTRAC reporting requirements.

Cryptocurrency regulations to take note of before you set up cryptocurrency company in Canada

  • The FINTRAC is Canada’s official financial intelligence unit (FIU) committed to overseeing the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while at the same time ensuring that personal information is safeguarded.
  • As of June 2020, all cryptocurrency exchanges and companies that deal with virtual currency in Canada must register with the FINTRAC as a Money Services Business (MSB).
  • A company is considered to be dealing with virtual currency if it provides the following services:
    • Virtual currency exchanging services which include exchanging fiat money for virtual currency; virtual currency for fiat money; and virtual currency for another virtual currency.
    • Virtual currency transfer services which include transferring virtual currency on behalf of a client or receiving virtual currency for remittance to a beneficiary.
  • The requirement to register as a Money Services Business also applies to foreign cryptocurrency exchanges that direct their services for Canadian clients.
  • Hence, it is now mandatory for all cryptocurrency companies in Canada to adhere strictly to the requirements of a Canada Money Services Business which includes the implementation of a compliance program, appointment of a compliance officer and maintaining records of clients and transactions.
  • As of 2021, cryptocurrency companies are also required to with to the Travel Rule which mandates that every Money Services Businesses must keep a record of all cross-border electronic fund transfers, including cryptocurrency transactions.

Why choose to set up cryptocurrency company in Canada?

  • There are multiple benefits to set up a cryptocurrency company in Canada.

Strong banking sector

  • Canada’s banking sector is dominated by 6 large banks and is widely regarded to have one of the safest banking systems in the world.
  • Not only do these large banks provide the necessary credit and liquidity required by businesses, they also have a strong capital buffer and a range of diversified assets to ensure that they are able to fund loans and saving accounts even during times of crisis.
  • Due to the strong regulations, the Canada banking sector managed to avoid the banking crisis that hit the US and many other European nations in 2008.

No cash deposit requirement

  • Unlike many countries which require a minimum initial capital to apply for a license to deal with electric money or virtual currencies, there is no minimum cash deposit requirement for a Canada cryptocurrency company.

Thriving fintech industry

  • The adoption of fintech has increased by more than 50% in the last 5 years.
  • The country’s comprehensive banking system has facilitated the rise in the use of fintech technology in Canada. Since Canada is dominated by several large banks, there is high level of consumer trust in these big banks. When fintech start-ups collaborate with banks, they can gain access to the bank’s large client base, and this will allow them to build their own reputability.

Requirements for a Canada MSB License to set up cryptocurrency company in Canada

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  • Since a cryptocurrency company in Canada must register as a Money Services Business (MSB), it must meet the requirements of an MSB.

Compliance program

  • All Money Services Businesses operating in Canada are required to implement a compliance program to show that they adhere to the standards provided by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.
  • Canada cryptocurrency companies are required to implement the following elements of a compliance program:
    • Appointment of a compliance officer to implement the compliance program.
    • Establishment and application of compliance policies that are regularly updated and approved by a senior officer.
    • Risk assessment of business activities to monitor and record the risk of criminal activities such as money laundering and terrorist activity financing.
    • Formulation, maintenance and deliverance of a compliance training program for employees and other relevant personnel.
    • Review of compliance program at least once every 2 years.
  • The compliance officer can be a senior manager or owner of the cryptocurrency company who is knowledgeable about the business operations and structure, the business sector’s ML/TF risks and the requirements under the PCMLTFA and associated Regulations. The appointed compliance officer should not be directly involved in the management of funds.

Know your client

  • All Money Services Businesses are required to verify the identity of their clients for certain activities and transactions and carry out other customer due diligence activities. Generally, this must be done in the following situations:
    • Large cash transactions where more than $10,000 is received
    • Large cryptocurrency transactions where more than $10,000 is received
    • Suspicious transactions
    • Transferring cryptocurrency in an amount equivalent to $1,000 or more
    • Exchanging cryptocurrency in an amount equivalent to $1,000 or more
    • Remitting cryptocurrency to a beneficiary in an amount equivalent to $1,000 or more
  • Verification of client’s identity involves ensuring that the information provided by the client is substantiated by an identification document.
  • In addition, Money Services Businesses must comply with the following regulations:
    • Money Services Businesses must conduct ongoing monitoring when they enter into a business relationship with a client. A cryptocurrency company is considered to have entered a business relationship with a client when it is required to verify the client’s identity for a second time or when it enters into a service agreement with a client that also provides Money Services Business service.
    • Money Services Businesses must implement measures to verify the accuracy of the information of beneficial owners of clients that are business entities. Beneficial owners are individuals who directly or indirectly own or control at least 25% of the company’s shares or voting rights.
    • Money Services Businesses must make a third party determination to determine whether a third party is involved in their business transactions or activities for large cash and virtual currency transactions. This can be done by requesting clients to indicate whether they are acting on behalf of another entity or whether another person or entity will be managing the transaction.
    • Money Services Businesses are required to implement measures to ensure that politically exposed persons (PEP), heads of international organizations (HIO) and their family members are determined for certain activities or transactions. Additional records must be kept when a client is determined to be a PEP, a HIO or a family member of a PEP/HIO.

Reporting

  • It is mandatory for all Money Services Businesses to submit the following reports to FINTRAC:
    • Suspicious transaction reports
    • Terrorist property reports
    • Large cash transaction reports
    • Large virtual currency transaction reports
    • Electronic funds transfer reports
  • Multiple transactions of cash or virtual currency within a 24-hour period will be regarded as a single transaction.
  • All reports must be submitted immediately once the nature and risk of the transaction has been identified.

Record Keeping

  • Money Services Businesses are required to keep the following records:
    • Reports – a copy of all 5 types of reports sent to FINTRAC
    • Large cash transaction records
    • Large virtual currency transaction records
    • Records of transactions of $3,000 or more
    • Records of remitting and transmitting $1,000 or more in funds by means other than an electronic funds transfer
    • Records of transmitted virtual sums of at least $1000
    • Records of transfers of virtual money that are at least $1,000
    • Foreign currency exchange transaction tickets
    • Virtual currency exchange transaction tickets
    • Created or received internal memorandums about MSB/FMSB services
    • Service agreement records

What other reputable jurisdictions to consider besides to set up cryptocurrency company in Canada?

  • Alternate jurisdictions that international clients can consider when choosing where to set up your cryptocurrency business include EstoniaMalta and Switzerland.

Estonia

  • Estonia is an attractive jurisdiction to set up a cryptocurrency company because of the ease of remote company incorporation and license registration, the lack of requirement for a resident director and the relatively low corporate tax rates.
  • Known as the world’s most digitally advanced society, almost all public services in Estonia are offered online. The country’s e-Residency initiative enables foreigners to easily set up a business in Estonia without living there.
  • Since Estonia is a member of the EU, obtaining a cryptocurrency license in Estonia will allow the company to operate in other countries in the European Union (EU).
  • Contact us to find out more about how to set up an Estonia cryptocurrency company. Our team of experts will revert within the next 24 hours.

Malta

  • Regulated by the Malta Financial Services Authority (MFSA), many major cryptocurrency exchanges around the world have chosen to set up a business in Malta due to its crypto-friendly environment.
  • The strict regulations and requirements to obtain a Malta cryptocurrency license means that a cryptocurrency company that holds a Malta cryptocurrency license is more credible and trustworthy.
  • Since Malta is also a member of the EU, obtaining a Malta cryptocurrency license will allow the company to gain access to the lucrative EU market.
  • Contact us to find out more about how to set up a Malta cryptocurrency company. Our team of experts will revert within the next 24 hours.

Switzerland

  • With a reputable banking sector that offers high level of confidentiality and a low corporate tax of 8.5% on Switzerland-sourced income, Switzerland is a popular place for company incorporation. There is also no corporate tax on foreign income derived outside of Switzerland.
  • All cryptocurrency companies in Switzerland are required to register with the Swiss Financial Market Supervisory Authority (FINMA).
  • In 2019, Switzerland introduced a new FinTech license for financial companies. This will authorize businesses to receive money transfers from the public that are CHF 100 million or below, if interest payment or investments are not made for these transfers.
  • Contact us to find out more about how to set up a Switzerland cryptocurrency company. Our team of experts will revert within the next 24 hours.

How to set up cryptocurrency company in Canada?

How-to-set-up-cryptocurrency-company-in-Canada

Step 1: Canada company registration

  • One of the main requirements to register a Canada company is that at least 25% of the directors in the company must be a resident Canadian. In the case that the company has less than 4 directors, at least 1 of them should be a resident Canadian.
  • Tetra Consultants will assist you in the incorporation of your company in Canada. You will be required to provide a list of required KYC documents such as the names of directors, company’s resolution and identification proof.
  • Based on the documents provided, Tetra Consultants will draft and notarize the Memorandum and Articles of Association, business plan and other incorporation documents.
  • After preparing the relevant documents, Tetra Consultants will register your company with the Canada Business Registry.

Step 2: Registration as a Money Services Business (MSB)

  • Tetra Consultants will complete and submit an online pre-registration form with FINTRAC.
  • After receiving approval, Tetra Consultants will assist in your company’s online MSB registration. You will be required to provide the following information:
    • Bank account information
    • Information about the company’s compliance officer
    • Number of employees
    • Incorporation information
    • Information about the company’s owners and senior management, such as their names and date of birth
    • An estimate of the expected total dollar amount of transactions per year for each MSB service your company provides
    • Detailed information about every branch if applicable
    • Detailed information about every MSB agent
  • Upon successful application, details of your company will be made available to the public through FINTRAC’s MSB registry search.

Step 3: Corporate bank account opening

  • Tetra Consultants will assist in consolidating the required corporate documents and opening a corporate bank account with a reputable bank that provides the relevant services such as multi-currency accounts.
  • Typically, directors and shareholders are not required to travel to Canada to open the corporate bank account. However, if travel is required, we will have a representative accompany you to the bank meeting. Alternatively, our team will negotiate with the banks to conduct a conference call instead or to request for a waiver.
  • Once the bank account has been successfully opened, Tetra Consultants will courier the internet banking token and access codes to your preferred address.

Step 4: Annual accounting and tax obligations

  • Tetra Consultants’ team of Chartered Accountants will ensure that your newly established cryptocurrency company continues to meet regulatory laws set by the Canada Revenue Agency. This includes providing you with monthly bookkeeping, preparation of financial statements and annual tax return filings.

Looking to set up cryptocurrency company in Canada?

FAQ

Is Cryptocurrency legal in Canada?

  • Yes, cryptocurrency is legal in Canada in the sense that you can purchase and sell cryptocurrency on cryptocurrency exchanges and use them to purchase certain goods and services. However, it is not a legal tender. The only legal tender in Canada are the bank notes issued by the Bank of Canada and coins issued by the Royal Canadian Mint.

Are cryptocurrencies regulated in Canada?

  • Cryptocurrencies are regarded as securities by the Bank of Canada and are primarily regulated under securities laws by the Canadian Securities Administrators.
  • As for cryptocurrency exchanges and other cryptocurrency companies, they are regarded as Money Services Businesses (MSBs) by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This means that they are required to comply with the standard of an MSB which includes implementing a compliance program, appointing a compliance officer and maintaining records of clients and transactions.

Do I have to pay taxes on cryptocurrency in Canada?

  • Cryptocurrency is taxed as either capital gains or as income tax in Canada, depending on your cryptocurrency activity. If the income earned from cryptocurrency is regarded as a capital gain, only 50% of the profits will be taxable. Otherwise, if it is regarded as a business income, it will be taxed on the full amount.
  • Gains from the cryptocurrency are regarded as a business income if you are undertaking business activities with regards to cryptocurrency such as cryptocurrency mining, cryptocurrency trading and cryptocurrency exchanges. In essence, any activities that involve buying a cryptocurrency with the purpose of selling it for a profit are usually treated as business income.

Is cryptocurrency real money?

  • No, it is not real money because it is not widely used as a payment of goods and services and cannot function as a unit of account due to its volatile nature. A cryptocurrency is a digital or virtual currency that is based on blockchain technology and not issued by any central authority. Although there is no cryptocurrency that is legal tender in Canada, it can be used to purchase goods and services on the Internet as well in some stores that accept virtual currencies. Investors can also buy and sell cryptocurrency on cryptocurrency exchanges.

How do I apply for a cryptocurrency license in Canada?

  • To operate a cryptocurrency business, companies can apply for a Money Services Business (MSB) with the FINTRAC. There is no separate license for cryptocurrency in Canada. This means that all businesses that provide money services, including cryptocurrency services, will apply for an MSB license. Application can be done online through the MSB registration system.

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