MSB license in Canada

Benefits of the Canadian MSB License

Canada’s MSB license offers several advantages that make it attractive for fintech, crypto, and payment businesses. Below are key benefits, including comparisons to European (EU) and United States equivalents:

• Accessible and Business-Friendly Regulation: Canada provides a beneficial business environment with a stable economy and strong rule of law. The process to register as an MSB is relatively straightforward and “easy” compared to many jurisdictions – there are no strict pre-approval requirements like capital or local staffing mandates. For example, no minimum capital is required (whereas an EU e-money institution license might require €350,000+ in capital and a lengthy vetting). No local directors or physical office are required either. This ease of entry means a well-prepared startup can become a licensed MSB in a matter of weeks, enabling faster time-to-market (“FAST” – a short period necessary for launch).
• Multipurpose License – One Registration, Many Services: A Canadian MSB registration is quite flexible and broad. With a single license, a company can offer multiple services (fiat currency exchange, remittance, crypto trading, etc.) as long as they are all declared. This contrasts with some other jurisdictions: for instance, in some EU countries, one might need separate authorizations for fiat money services vs. crypto (or additional endorsements for each new activity). In Canada, MSB status covers all listed activities, making it a “multipurpose license” under one regulatory framework. A fintech can combine traditional money services and cryptocurrency services under the same regulatory umbrella in Canada, which is not always possible elsewhere without multiple licenses.
• No Government License Fees and Lower Costs: FINTRAC does not charge any application or registration fee for MSBs. By comparison, in the United States, while FinCEN’s federal MSB registration is free, a company typically must apply for ~50 individual state money transmitter licenses each with fees (often $500-$5000 per state plus surety bonds) – obtaining full U.S. coverage can cost $2 million+ in fees and bonds and take years. Canada has one federal registration for the whole country at zero cost (provincial licenses exist only in certain provinces like Québec, but not most others). This is a major cost and complexity advantage. Compliance costs in Canada are also proportionate to the business size; there is no mandated large compliance bond or insurance requirement (some U.S. states require bonding up to $1M). Overall, the cost of entry in Canada is significantly lower than the U.S. multi-state regime or EU licensing in terms of fees and capital.
• Faster Approval and Launch Timeline: Thanks to a streamlined process, getting an MSB registration is relatively quick. Industry experience suggests approvals often come in 1–3 months if documentation is complete, and indeed Canadian advisors tout the short period between registration and actual launch as a selling point. In contrast, EU payment institution licenses can take 6–12 months for approval with extensive back-and-forth, and U.S. state licenses can also drag on for many months each. Canada’s faster timeline means fintech companies can start operations and generating revenue sooner, which is a critical benefit for startups.
• Reasonable Compliance Burden (No Overly Strict Requirements): While AML compliance is taken seriously, Canada’s MSB regime has some pragmatic thresholds. For example, no external audit is required unless the MSB’s revenues exceed CAD $1 million per year. Small MSBs are spared costly audits. There is no automatic internal audit requirement either. Reporting requirements focus on key risk areas (large transactions, suspicious activity) and are not as frequent or onerous as some other jurisdictions that might require regular regulatory filings beyond AML reports. In summary, “NO STRICT REPORTING REQUIREMENTS” in most cases, as one analysis put it – MSBs primarily just have to do the standard AML reports and keep records, without burdens like frequent financial returns or capital adequacy reports that a bank or an EU e-money institution would file.
• Ability to Offer Both Fiat and Crypto Services: Canada is among the jurisdictions that explicitly regulate crypto exchanges as MSBs, which paradoxically is a benefit: it gives crypto businesses a clear legal pathway to operate. With one registration, a company can handle fiat money transfers and also deal in virtual currencies. Many countries still lack clear rules for crypto platforms or require separate licensing. In Canada, if you comply as an MSB, you can legally offer cryptocurrency exchange or transfer services alongside traditional services. (Do note, for certain crypto activities like running a crypto trading platform dealing in securities tokens, additional securities oversight may apply, but for pure exchange of Bitcoin, etc., MSB registration is the main requirement.) This integrated approach is attractive for crypto-fintech hybrids. It also means MSBs can adapt and add new services (e.g. a money remittance company adding crypto remittances) relatively easily by updating their registration.
• Developed Financial Infrastructure and Market Access: Being a Canadian MSB gives you access to Canada’s well-developed financial infrastructure. Canada’s banking system is robust and highly regarded globally. MSBs registered in Canada operate in a currency (CAD) that is stable, in a country with strong ties to international markets. Canada’s close economic relationship with the United States is a benefit – Canadian MSBs can more easily partner with U.S. firms or align with U.S. payment systems compared to a business based elsewhere. Additionally, Canada has numerous tax treaties and a self-assessment tax system that can be advantageous for international investors. English (and French) are official languages, which makes it accessible. All these factors mean a Canadian MSB license can instill confidence in partners and pave the way for North American market integration.
• Reputation and Trust: Canada is generally seen as a reputable, low-risk jurisdiction internationally. Having a Canadian MSB registration can lend credibility when dealing with partners or regulators elsewhere. It signals that the company is subject to a respectable AML regime. For example, obtaining European banking partners or U.S. correspondents may be easier for a Canadian-licensed MSB than for one based in a less regulated jurisdiction. Indeed, numerous successful fintech companies (OctopusPays, Jingle Pay, GenioPay, Bendix FX, Huobi, Veem, etc.) have chosen Canadian MSB registration as a base. As of September 2023, over 4,700 MSBs were registered in Canada, with 700+ new registrations in the prior year alone – demonstrating the popularity and acceptance of this license.
• Tax Advantages for International Businesses: While Canadian corporate tax rates are moderate, foreign owners can often benefit from Canada’s wide network of tax treaties that reduce withholding taxes on dividends (often down from the standard 25%). Also, financial services being GST-exempt means MSBs don’t have to charge or pay 5% federal sales tax on their transaction fees, which effectively makes their services a bit cheaper compared to if tax applied. By comparison, in some EU countries financial services are VAT-exempt similarly, but in others certain crypto services were in grey area until recently; Canada’s clarity on GST exemption for payment services (including crypto transactions) is a benefit.

Disadvantages and Challenges

While the Canadian MSB license has many advantages, there are also some drawbacks and challenges to consider:

• Not a Full Financial License (Limited Scope): The MSB registration is not equivalent to a banking or securities license. Its scope is limited to the money services defined by FINTRAC. This means an MSB cannot engage in activities like taking customer deposits, lending, investment advisory, or trading securities – at least not without obtaining additional licenses from the appropriate regulators. For example, if a Canadian MSB wanted to offer stored-value accounts or issue payment cards that hold client funds beyond facilitating transfers, it may step into “deposit-taking” territory, which is not allowed for MSBs. Similarly, facilitating investment in securities or operating an investment crowdfunding platform would require securities regulatory approval in addition to MSB status. In contrast, an EU Electronic Money Institution (EMI) license or a U.S. bank license would allow holding customer funds or broader financial services. Therefore, the Canadian MSB is somewhat limited – it’s great for payments and crypto exchange, but if your business model goes beyond that, you’ll hit a regulatory ceiling.
• Perception and Banking Access Issues: A significant challenge for MSBs in Canada (as in many countries) is access to banking services. Banks often view MSBs – especially those dealing in high-risk areas like remittances or crypto – as higher-risk clients. Canadian banks, under regulatory pressure, have engaged in “de-risking” whereby they avoid providing accounts to MSBs or impose heavy due diligence. As a result, a newly registered MSB might struggle to open a corporate bank account in Canada. Many MSBs find they must approach multiple banks and often end up using second-tier institutions or credit unions to obtain basic banking. This is a well-known issue: even if you’re fully compliant, you “will always be at risk of bank rejection” simply due to the nature of the MSB business. Startups should be prepared for this and may need to demonstrate an especially strong compliance program to convince banks. By comparison, an EU-licensed EMI or Payment Institution might similarly face caution from banks, but in the U.S., a money transmitter often faces even greater hurdles (many U.S. MSBs resort to banking with a few friendly institutions). It’s a global problem, but prospective Canadian MSBs should not assume that having the FINTRAC license guarantees easy banking relationships.
• Ongoing Compliance Burden: While we noted that Canada’s requirements are not overly strict in structure, they are still significant. An MSB must continuously maintain a robust AML compliance program. This includes costs for compliance officers, staff training, systems for transaction monitoring, and regular independent audits (at least every two years). For a small startup, dedicating resources to these areas can be challenging. FINTRAC has stepped up enforcement in recent years, issuing fines to MSBs that fail to report or keep records properly. Non-compliance can result in public penalties (which can harm reputation) or even criminal charges if willful blindness is found. So, the license comes with a heavy compliance responsibility – something that might be considered a disadvantage relative to an unlicensed scenario (though being unlicensed is not a real option if you want to operate legally). In short, an MSB must budget time and money for compliance continuously, which can be burdensome for small operations.
• Renewal and Maintenance: The MSB registration is not one-and-done; it expires every two years if not renewed. The renewal itself is not difficult (no fee, just updating info), but it’s an administrative task that cannot be missed. If an MSB fails to renew, it will lose its registered status (FINTRAC lists it as “Expired”) and must cease activities until re-registered. This renewal cycle is more frequent than some other licenses – for instance, FinCEN MSB registration in the U.S. also requires biannual renewal, but many other financial licenses (like a banking license) don’t expire so regularly. It’s a minor disadvantage, but forgetting a renewal could have serious consequences. Additionally, MSBs are required to promptly update FINTRAC whenever certain business details change (ownership changes, new products, address changes, etc.), which adds to ongoing admin work.
• Provincial Licensing Requirements: Canada has a federal system, and while the FINTRAC registration covers AML nationwide, some provinces impose additional licensing on MSBs for consumer protection/crime prevention reasons. The prime example is Québec, which requires any MSB operating in the province (even if federally registered) to obtain a Money-Services Businesses license from Revenu Québec (formerly overseen by the Autorité des marchés financiers). Québec’s regime involves its own application, background checks, and fees. If an MSB will have a physical presence or customers in Québec, this is effectively an extra hurdle. Other provinces have been examining similar measures: British Columbia has signaled intentions to introduce a provincial MSB licensing scheme as well. This patchwork means a Canadian MSB could face additional compliance layers depending on where it operates. This is somewhat analogous to the U.S. state-by-state licenses (though on a much smaller scale). It reduces the simplicity advantage of the Canadian system slightly, at least for those regions. Companies need to research provincial rules to avoid penalties at that level.
• Limited Passporting/Recognition Abroad: A Canadian MSB license is only valid for operations in Canada. Unlike an EU EMI license which can “passport” services across all EU member states, the MSB registration does not grant automatic rights to operate in other countries’ markets. If a Canadian MSB wants to actively expand to, say, the U.S. or Europe, it will need to comply with those jurisdictions’ licensing requirements separately (e.g. obtain state licenses in the U.S., or register as a crypto-asset service provider in Europe, etc.). In other words, the Canadian MSB license is great for operating in Canada and as a mark of AML credibility, but it doesn’t reduce the need to get licensed elsewhere. Some foreign regulators might still view an MSB as a less regulated entity compared to a bank or EMI. Thus, for globally ambitious companies, the MSB license is only one piece of the puzzle.
• Potential Need for Additional Oversight (RPAA for PSPs): A recent development is the Retail Payment Activities Act (RPAA) in Canada (discussed more under legislative updates). Many MSBs that provide payment services (like money transfers, payment processing) will also have to register with the Bank of Canada under this new regime for retail payment providers. That means additional compliance requirements (operational risk, safeguarding, etc.) beyond AML. While not a disadvantage of the MSB license per se, it means the regulatory burden on MSBs engaged in payments is increasing. An MSB might soon need to deal with two regulators – FINTRAC for AML and Bank of Canada for operational standards – which is more complex than before. This can be seen as a disadvantage in that the relatively light-touch environment is shifting to more oversight.
• High Competition in Fintech Space: Given the ease of obtaining an MSB registration, Canada has many registered MSBs (thousands, as noted). This means competition can be intense in certain niches (e.g. many crypto ATMs, many small remittance startups). The value of the license in terms of market exclusivity is low – anyone can get it if they qualify. Unlike, say, a banking license which is hard to get and hence gives incumbents a moat, an MSB license is not a significant barrier. Startups still have to differentiate on product, pricing, and technology, not on having the license. This is more a business consideration than a regulatory one, but it’s worth noting that the low barrier to entry can be a double-edged sword: you’ll have many competitors who also quickly got licensed.

Types of MSB Licenses and Service Categories

In the context of Canadian regulation, there aren’t multiple classes of MSB licenses with differing levels of authority – instead, the MSB registration is a single license that can encompass various service categories. However, we can distinguish between two types of registrants and the service scopes they may choose:

• Canadian MSB vs. Foreign MSB: FINTRAC differentiates based on the location of the business. A Canadian MSB is one that has a place of business in Canada (this could mean it’s incorporated in Canada or has a physical location, branch, or agents here). A Foreign MSB is one with no business presence in Canada, but which directs services to Canada (for example, an overseas company serving Canadian clients online). Both types have to register and fulfill the same AML obligations. The main difference is procedural: foreign MSBs must appoint a local agent in Canada and meet an extra condition of “directing services” at Canada when registering. FINTRAC’s registration portal will ask if you’re registering as an MSB or FMSB. The license granted is essentially the same, but FINTRAC’s public registry will label a foreign MSB as such. In effect, this distinction allows foreign companies to legally include Canadian customers by coming under Canadian oversight. (If they fail to register, they’d be considered non-compliant and subject to enforcement if detected).
• Service Categories (Scope of Services): When applying for the MSB license, an applicant must specify which services (among the five main categories discussed in Scope of Permitted Activities) they intend to offer. These are:
  • Currency exchange services
  • Funds remittance or transfer services
  • Money orders/traveler’s cheques issuance/redemption
  • Dealing in virtual currency (crypto exchange/transfer)
  • Crowdfunding platform services
• An MSB can register for any combination of these. There are no separate “sub-licenses” for each category; it is one registration listing multiple activities. For instance, a business could register as an MSB that will conduct foreign exchange, remittances, and crypto dealing all together. FINTRAC will list all approved service types on the MSB’s public profile. If later the MSB wants to add a new service type, it must update its registration. Each category has its specific compliance considerations (e.g. if you deal in virtual currency, you’ll have to also do Large Virtual Currency Transaction Reports, etc.), but from a licensing perspective, it’s a unified license.
• Provincial Licensing (Separate from FINTRAC): It’s worth mentioning again that Québec’s Money-Services Businesses license is essentially a separate type of license outside the FINTRAC system. That license has its own categories (which overlap with the federal ones: currency exchange, funds transfer, issuance of cheques, the operation of ATMs, etc.). If operating in Québec, one must hold both the federal MSB registration and the provincial MSB license. This is not a “type” of MSB license in the federal sense, but an additional licensing regime. Similarly, if other provinces like BC introduce MSB licenses, those would be separate credentials. They are beyond the scope of FINTRAC but important for completeness: a business might end up needing multiple licenses (federal MSB + provincial MSB) to fully comply.

In summary, Canada’s MSB license is essentially one-size-fits-all at the federal level, with customization by selecting service scopes and whether you are domestic or foreign. You don’t get a fundamentally different license for different activities – it’s the same certificate of registration – but the permitted activities depend on what you applied for. This simplicity is beneficial; unlike, say, the U.S. where a money transmitter license versus a currency exchanger might be slightly different in some states, Canada uses the single MSB concept to cover all. As long as you list the activities, your single MSB registration is valid for them.

For clarity, here is a summary of MSB service scope options under the Canadian license (as chosen during registration):

• Foreign Exchange Dealing
• Money Transfer/Remittance
• Money Orders/Traveler’s Cheques (Issuance or Redemption)
• Dealing in Virtual Currencies
• Crowdfunding Platform Services

Each of these corresponds to the legal definitions in the PCMLTFA regulations. When FINTRAC issues the MSB registration, it will explicitly include the services the business is authorized for (viewable in the public MSB registry lookup). There’s no tiered licensing (like primary vs. limited license); all MSBs meet the same criteria regardless of how many services they do. Therefore, when planning your MSB business, you should decide which of these services you will offer and ensure they are included in your application. If you later expand into a new category, update the registration accordingly to stay compliant.

Requirements for Obtaining the License

Obtaining a Canadian MSB license (FINTRAC registration) involves meeting certain eligibility criteria and preparing the required documentation. Unlike many financial licenses, the pre-approval requirements are relatively straightforward, but they must be taken seriously to ensure a smooth application. Here’s what is generally required to successfully register as an MSB in Canada:

• A Canadian Company or Legal Presence: While not strictly mandatory to incorporate in Canada (a foreign entity can register as an FMSB), in practice most applicants establish a Canadian corporation to operate the MSB. Incorporating federally or in a province like British Columbia is common. (BC is often preferred by foreign founders because it does not require any Canadian-resident directors, making incorporation easier for non-Canadians.) You will need to provide your business’s legal name, address, formation documents, etc., in the application. If you’re a sole proprietor, you’ll use your personal name and details instead.
• Fit and Proper Persons (Good Character): All owners (beneficial owners with 20% or more ownership), directors, and senior managers of the business must be in good standing. This means no serious criminal history and a good reputation. FINTRAC will ask for details on the individuals in control. People with criminal convictions for offenses like fraud, money laundering, terrorist activity, drug trafficking, etc., are ineligible to register an MSB. You will be required to attest to the criminal record status and possibly provide criminal background checks if requested. In short, the principals must have a clean record. Additionally, you need to be transparent about the ownership structure – FINTRAC wants to know who the beneficial owners are (the actual individuals ultimately owning the company) to vet their eligibility.
• Identification Documents and Personal Information: As part of the application (or prior corporate setup), you should gather standard KYC documents for each key individual (owners, directors, the compliance officer). This typically includes a valid passport or government photo ID and proof of residential address for each person. Often a recent utility bill or bank statement is used for address verification. Curriculum vitae (CVs) or resumes are also often provided to demonstrate the experience of the team (FINTRAC’s form may not strictly require CVs, but it is good practice to have them, especially to show the appointed Compliance Officer has relevant experience). If using a service provider or consultant to help, they may compile these documents for submission or for their due diligence.
• Appoint an AML Compliance Officer: Every MSB must designate a Compliance Officer who will be responsible for the implementation of the anti-money laundering program. This person should ideally have compliance or financial industry experience, because FINTRAC may informally assess whether the person appears capable of carrying out the role. The compliance officer can be an internal staff member or an external compliance professional. Importantly, there is no requirement that the Compliance Officer be a Canadian resident – they just need to be officially appointed and have authority over the program. You will need to provide this individual’s details in the application.
• Prepare an AML Compliance Program (Policies & Risk Assessment): Before applying, an MSB should have its anti-money laundering (AML) policies and procedures drafted. FINTRAC doesn’t require you to submit the full policy manual with the initial application, but they can ask for it, and you will certainly need it ready by the time you start operations. This includes:
  • Written AML/CFT policies and procedures tailored to your business (how you will meet client identification requirements, how you will keep records, how you will report STRs/CTRs, etc.).
  • A documented Risk Assessment of your business’s exposure to money laundering/terrorist financing risks and how you mitigate them.
  • A Compliance training plan for staff.
  • An AML compliance effectiveness review plan (how you will do the mandatory two-year independent review).
• Many MSB applicants hire consultants or legal advisors to help prepare these documents. In fact, “Drafting of documents (business plan and AML/CFT policies)” is often a stage in the project, taking a few weeks. While not submitted upfront, being able to show FINTRAC that you have a solid compliance program is crucial – sometimes during the vetting, FINTRAC officers will ask questions about your program or even request to see parts of it.
• Business Plan and Description of Services: You should be ready to describe your business model in detail: what services you will offer, to what target market, through what channels (online, in person), which geographic areas, and what your anticipated transaction volumes are. FINTRAC’s application may ask for a general description. The user’s uploaded file indicates that for MSB registration, a description of the business model and the company’s website are required. Indeed, providing a concise business plan (covering how you will operate without facilitating illicit activity) is recommended. If your MSB involves novel elements (like a new fintech app), be prepared to explain it clearly to the regulators. A website is also expected – FINTRAC often checks the applicant’s website to see what they are advertising. Ensure your website is consistent with your application (e.g. it doesn’t promise services you didn’t mention to FINTRAC).
• Financial Standing and Funding: Although there is no minimum capital, you may need to demonstrate that you have the financial means to carry on the business. Sometimes banks (when opening an account) ask for proof of funds of shareholders to ensure legitimate sources. While FINTRAC might not demand bank statements during registration, they do want assurance that owners can fund the business legitimately. Shareholders should be ready to prove source of funds for their investment if asked.
• Infrastructure and Platform Ready: By the time of launch, you should have your operational infrastructure (e.g. your transaction processing system, customer onboarding/KYC system) in place, but for the registration application itself, you mainly need to outline it, not show it. FINTRAC doesn’t do a tech audit; however, if questioned, you should be able to explain how you will implement controls (for instance, what system will you use to record transactions and flag suspicious patterns, how you will verify customer ID, etc.). It’s more of a readiness requirement than a formal one.
• Required Forms and Submission: The actual registration application is done via forms on the FINTRAC website (MSB Registration system). You will fill out:
  • Business identification details (name, address, incorporation number, etc.).
  • Owner and director information (names, addresses, birthdates, titles).
  • Compliance officer information.
  • Services to be offered (checklist of MSB activities).
  • Projected start date and possibly expected annual volumes.
  • Agent locations or other trading names if applicable.
• After submission, FINTRAC might come back with clarification requests if anything is unclear or if additional info is needed (for example, if they suspect you need to register a service you didn’t select, or want proof of something). Being responsive and thorough in replying will speed up approval.
• Additional Documents: According to the user’s file, for the project setup the following were expected: copies of passports, proof of address, CVs, etc., for each UBO/director; plus the business model description and website ready. Also, if a corporate bank account is to be opened concurrently, banks will require these documents. While FINTRAC itself may not collect all these documents at registration time, it’s prudent to have them ready.

In essence, the requirements boil down to: having the right people (honest and qualified) in charge, having a company vehicle to operate through, and having a solid plan for compliance. Because FINTRAC doesn’t impose financial prerequisites, the emphasis is truly on compliance readiness and transparency of ownership. Most applications that fail or are delayed do so because the applicant didn’t disclose something important (like a criminal past) or didn’t convince FINTRAC they understand their obligations. As long as you prepare all needed documentation and information upfront, the application process is quite manageable.

A checklist of key items to prepare for an MSB application might look like this:

• Canadian company incorporation documents (or foreign company info if applying as FMSB)
• Government IDs and proof of address for owners, directors, compliance officer
• Résumés of principals (especially Compliance Officer)
• Completed draft of AML Policies & Procedures manual
• Business plan and service description (including website ready)
• Appointment letter or internal memo naming the Compliance Officer
• (For foreign MSB) Agreement with a Canadian agent for service (if required)
• FINTRAC account setup for online application submission

Costs and Taxation

One of the attractive aspects of the Canadian MSB license is the relatively low upfront cost from a regulatory fee standpoint. However, there are still costs involved in setting up and running an MSB. Additionally, businesses must consider the Canadian tax environment. Let’s break down the costs and the taxation framework for MSBs:

Costs of Obtaining and Operating an MSB

• Regulatory Fees: FINTRAC does not charge any application or registration fee for MSBs. The registration process itself is free. This is a big contrast to some jurisdictions where hefty license application fees are the norm. For example, in the U.S., each state license has an application fee, but in Canada, whether you’re registering 1 service or 5 services, there’s no fee to FINTRAC.
• Incorporation and Corporate Setup: If you incorporate a company in Canada, there will be some costs for that. Federal incorporation costs roughly ~CAD $200-$300 in government fees, and provincial incorporation varies (Ontario is about $360, British Columbia about $350, etc.). Often, companies use service providers or lawyers to incorporate, which adds professional fees. According to the user’s data, a service package for Canadian company registration (including name search, registered office for 1 year, government fees, tax number, etc.) might run around EUR 3,570 (approximately CAD $5,000), if you pay a law firm to handle it. Doing it yourself is cheaper (just the government fees plus maybe a small name search fee). So, one cost to budget is a few hundred dollars for incorporation and maybe a few hundred per year for a registered address if you don’t have your own office (many MSBs use virtual office providers for a mailing address).
• Compliance Program Development: Drafting an AML compliance program might require expert help if the team lacks experience. Firms (like the one whose data we have) charge for preparing business plans and AML/CFT policies – in one example, this was quoted as part of a package (with a portion maybe around EUR 3,000 for documentation). If you have compliance expertise in-house, you might do this at low cost, but many startups spend a few thousand dollars on consulting or template policies to get started.
• Professional Advisory Fees: Many MSBs engage consultants or law firms to assist with the entire application process. This can include incorporation, policy drafting, preparing application forms, and liaising with FINTRAC. The user’s file suggests a “turnkey project cost” for an MSB setup of about EUR 19,430 (which included company registration, document prep, application submission, and even opening a bank account). This figure (roughly CAD $28,000) is an example of a full-service package. Not all MSBs will spend that much – it’s possible to do it for far less if done in-house – but it gives an idea of costs if outsourcing most tasks. Some legal firms might charge in the $10k-$20k CAD range for end-to-end assistance. It’s important to note this is not a government cost but a professional service cost.
• MSB Registration Maintenance: After initial registration, there are minor costs like renewing your registration every 2 years (no fee, but possibly you might have a consultant help for a small fee), and updating any changes. FINTRAC itself doesn’t charge for updates or renewals. So regulatory maintenance cost in fees is nil, but the effort is internal.
• Provincial License Fees: If you need a provincial MSB license (e.g. Québec), there will be fees for that. For instance, Québec’s license has an application fee (approximately CAD $1,500) plus an annual fee that scales with volume of business. Since that’s outside federal scope, just be aware it’s a separate cost if applicable.
• Compliance Operations: Ongoing compliance is likely the largest cost center for an MSB after launch. This includes:
  • Personnel: A Compliance Officer’s salary (if you hire a full-time one). Depending on experience, that could be $60k-$100k CAD/year or more. Some startups might have the CEO or another officer double-hat as Compliance initially to save cost (permitted, as long as they effectively do the job).
  • Training: You need to train staff regularly; this might involve courses or online training modules (a few hundred dollars per employee per year perhaps).
  • Systems: If you deploy software for transaction monitoring, sanctions screening, etc., that can range from inexpensive (for basic tools or small volumes) to significant (thousands per month for robust systems). There are now many RegTech solutions at various price points.
  • Independent Reviews: Every two years, you must have an AML effectiveness review done by an internal audit or external consultant. Many MSBs hire an external auditor for this; cost might be anywhere from $3k to $10k+ depending on complexity.
  • Reporting and Recordkeeping: While not a direct “fee”, consider the workload – someone needs to prepare suspicious transaction reports, large transaction reports, etc. If volume is high, this might necessitate more compliance staff or outsourcing.
• Banking and Bonding: While no regulatory bond is needed, some MSBs voluntarily hold a surety bond or extra insurance to demonstrate stability (especially when dealing with partners). Also, banks may require a certain deposit to be maintained. For example, an MSB might need to keep a minimum balance with a bank or pay slightly higher fees for wire transfers, etc. These aren’t licensing costs, but costs of doing business as an MSB (which tends to have higher banking fees). Some payment processors might ask for a reserve or security if you partner with them.
• Technology and Security: If you’re launching an online service or crypto service, there’s cost in building or licensing the platform, cybersecurity measures, etc. These are business costs, not license fees, but worth noting that a compliant operation might need good IT infrastructure (and possibly an audit of IT if required by partners).

Taxation for MSBs

MSB companies in Canada are subject to the same tax regime as other Canadian businesses. Key points on taxation:

• Corporate Income Tax: Canada’s corporate tax is applied at both the federal and provincial levels. The federal base rate is 38%, but there is a general reduction and abatement for income earned in provinces, which brings the net federal rate down to 15% on active business income for most corporations (this is the general rate for large corporations). Small Canadian-controlled private corporations (CCPCs) have an even lower federal rate (9% on their first $500k of active income, due to the small business deduction, though if the MSB is foreign-owned it wouldn’t get that small business rate). Then provinces add their corporate tax: for example, British Columbia’s provincial corporate tax is 12%, Ontario’s is 11.5%, etc. So a typical combined rate for an MSB that doesn’t qualify for small-business rate would be around 27% in BC, ~26.5% in Ontario, etc. If the MSB qualifies as a small CCPC, combined rates would be lower (~9% fed + ~2-4% prov). The user’s data specifically notes: after federal abatement and general reduction, net federal is 15%, and in BC add 12%, making 27%. That aligns with known rates.
• Goods and Services Tax (GST): The GST is Canada’s value-added tax (federal level 5%). Most financial services are exempt from GST, meaning MSBs do not charge GST on the fees they take for their services, and conversely cannot claim input GST credits on related purchases. The data confirms: “financial services (involving payment instruments, including virtual) are exempt from GST”. This is favorable to consumers of MSB services (no sales tax added on a $20 remittance fee, for example). For the MSB, it means you won’t remit GST on your revenue. However, note that because of exemption, any GST you pay on expenses (like consulting fees, etc.) becomes a cost (you can’t rebate it). But typically, this is not too large a burden. Provincial sales taxes may also exempt financial services or not apply to services, depending on the province.
• Dividend Withholding Tax: If the MSB company distributes profits as dividends to non-resident shareholders (e.g. if the MSB is owned by a foreign parent or individual abroad), Canadian law imposes a 25% withholding tax on dividends paid to non-residents. However, Canada has tax treaties with many countries that reduce this rate, often to 5%, 10%, or 15% depending on the treaty and ownership percentage. For example, a dividend to a U.S. parent company might be just 5% WHT if the U.S. parent owns over 10% of the Canadian company, due to the tax treaty. So foreign owners will want to structure ownership to take advantage of treaties. If the MSB owners are Canadian residents, then dividends are taxed under normal Canadian personal tax rules (with a dividend tax credit mechanism for integration).
• Personal Income Tax: Not directly a company issue, but if you are an owner-operator drawing salary or dividends, consider Canadian personal tax rates (which are progressive and can be high at top brackets ~50%). But that’s general to doing business in Canada.
• Provincial Taxes: In addition to provincial corporate tax mentioned, note that some provinces have capital taxes or franchise taxes on corporations (most have eliminated for general corporations, but some have small fixed fees or in Quebec, there’s a compensation tax for financial institutions – however, MSBs are not considered financial institutions for those purposes typically, since those target banks, insurance companies). Generally, an MSB as a regular corporation doesn’t face special provincial levies beyond the income tax.
• Payroll taxes: If you hire employees, you’ll deal with payroll deductions, employment insurance, Canada Pension Plan contributions, etc. Standard business obligations.
• Specific MSB Levies: Unlike some countries that have special levies on money transmitters or a “money services business fee”, Canada doesn’t impose any extra tax or levy on MSBs at the federal level. (For example, some U.S. states charge an annual assessment fee to money transmitters; Canada does not.) The cost to maintain the license is not revenue-based. The only thing to watch is if you’re in a province like Quebec, there might be an annual license fee based on volume (Quebec charges an annual fee tiered by the total amount of transactions).
• Example – Tax Calculation: Suppose an MSB has $1,000,000 CAD in pre-tax profit. If it’s not a small CCPC, it would pay ~15% federal = $150k, plus say 11-12% provincial (let’s average at 11.5 for Ontario) = $115k, total ~$265k, leaving ~$735k after tax. If it then pays a dividend to a U.S. corporate parent, it might withhold 5% ($36.75k) if treaty allows, meaning $698k goes to the parent after all taxes. These are rough figures but illustrate how the pieces come together.
• Tax Treaties and International Considerations: Canada’s broad treaty network can often reduce double-taxation. For example, the U.S. and Canada treaty reduces many cross-border payment taxes. If the MSB is part of an international group, profits can often be upstreamed efficiently.
• Transfer Pricing: If the MSB is doing business with foreign affiliates (maybe a parent company providing services, etc.), Canadian tax authorities will expect arm’s length transfer pricing. This is beyond the scope here but just a note for larger structures.

In short, Canada’s tax system for an MSB is standard – corporate income taxed at ~26-27% (if large) or lower if small, and financial services are GST exempt which generally is favorable. There are no surprise taxes specifically for being an MSB. From a global perspective, Canada’s corporate tax rate is moderate (higher than some low-tax jurisdictions, but lower than the U.S. used to be pre-2018). Many fintech startups accept this as the cost of operating in a reputable jurisdiction with good infrastructure. And if the MSB is owned by foreigners, planning for treaty benefits can make profit repatriation tax-efficient (e.g. often a 5-10% effective tax on dividends out, as noted).

Regulatory Note: Although not a tax, one should consider if any fees to regulators exist: FINTRAC is funded by government, so it doesn’t charge fees. The new Bank of Canada RPAA regime will have some fee for registration and possibly an annual fee (to be determined by regulations). This could introduce a small cost in the future (the Bank of Canada has indicated there will be a one-time registration fee for PSPs under RPAA, likely modest). But as of now, nothing significant is in force on that front.

Application Process (Step-by-Step)

Obtaining the MSB license involves a series of steps from preliminary setup to final approval. Below is a step-by-step breakdown of the application process, along with typical timelines for each step: