In recent years, Canada has become one of the most attractive jurisdictions for fintech companies dealing with cryptocurrencies and providing innovative financial services. Compared to other developed countries, this is facilitated by lighter industry government regulation.
One of Canada’s key advantages is the availability of an MSB (Money Services Business) license for companies involved in cryptocurrencies, payments, and transfers. Unlike in European countries, where the licensing process can take over one year, obtaining an MSB license in Canada can be completed in 3 or 4 months. This license allows businesses to operate globally, offering services to clients worldwide, except in countries that require mandatory local licensing. Thus, MSB is an ideal choice for startups aiming to quickly and cost-effectively enter the financial services market. Due to these conditions, Canada has attracted dozens of promising fintech startups from around the world, and experts estimate that this trend will continue to gain momentum in the coming years.
What is an MSB License
An MSB (Money Services Business) license is a special license in Canada that allows companies to provide financial services, including crypto services, currency exchange, issuance and sale of payment instruments, cryptocurrency exchange, and other operations. MSBs are regulated by FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada, established in 2000. FINTRAC’s primary functions include monitoring and supervising reporting entities, analyzing reports from financial organizations, issuing permits and licenses, and combating money laundering in Canada.
An MSB license is required for companies that:
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- Transfer money for clients domestically or internationally.
- Exchange currency, such as converting dollars to euros.
- Issue and sell money orders, checks, or payment cards.
- Exchange cryptocurrency for fiat currency.
- Offer e-wallet or payment services.
Both companies and individual entrepreneurs can obtain an MSB license. While most countries impose significant restrictions on individual entrepreneurs accessing financial licenses, American and Canadian, individual entrepreneurs can apply for an MSB license.
Why Choose an MSB License
- Faster and simplified application process compared to European electronic money or payment institution licenses.
- No need to establish a separate legal entity in Canada; you can operate through your existing European entity.
- No requirement to prove the presence of an office, minimum capital, or provide a detailed business plan. The registration process with FINTRAC takes 1-2 months.
- Lower capital requirements for the company, ranging from $10,000 to $100,000 CAD, depending on transaction volume.
- Enables global operations, except in countries with mandatory local licensing requirements.
- Simplifies reporting and compliance procedures compared to Europe.
- Allows various financial services: transfers, currency exchange, cryptocurrency operations, issuing payment cards, and more.
- Relatively low annual maintenance fees for the MSB license.
- The presence of a license enhances customer trust and allows legal provision of financial services within the regulator’s jurisdiction.
Comparison of MSB and EMI Licenses
The European EMI (E-Money Institution) license may be equivalent to the Canadian MSB license. While both licenses allow the legal provision of financial services and money transfers, there are significant differences in some instances.
FINTRAC issues the MSB license and allows money transfers, currency exchange, and cryptocurrency operations in Canada. The minimum capital required starts from $10,000 CAD. The application process takes 3-6 months.
EU regulators issue the EMI license, which grants the right to issue electronic money and provide financial services in Europe. The minimum capital required is €350,000. The application process takes 1-2 years.
Thus, compared to the European EMI license, the Canadian MSB license offers more advantages, including faster licensing, lower capital requirements, and the ability to work with cryptocurrencies.
To obtain an MSB license, follow these steps:
- Register a legal entity in Canada or open a branch of a foreign company.
- Prepare a document package, including financial statements, a business plan, KYC, and AML policies.
- Pass FINTRAC’s assessment for compliance, capital, and reporting.
- Pay the registration fee for the MSB license.
- Receive the registration number and open a bank account for operations.
The licensing process typically takes around 3-4 months on average. After completing these steps, your legal entity will be added to the MSB registry, allowing you to start providing financial services.
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