CANADA Law and Practice Contributed by: Irbaz Wahab, Cloudhaus Law
have a standalone white paper requirement equivalent to those found in other jurisdictions. However, where a token is a security, standard prospectus or offering memorandum disclosure requirements apply, which effectively function as disclosure obligations govern- ing the terms, risks and use of proceeds of the issu- ance. 2.5 Market Abuse Canada does not have a standalone market abuse regime specifically tailored to crypto-assets. Where a crypto-asset constitutes a security or derivative, the market abuse and insider trading provisions of appli- cable provincial securities legislation apply, including prohibitions on trading on material non-public infor- mation, tipping and market manipulation. The OSC and other provincial regulators have authority to pur- sue enforcement action against such conduct involv- ing crypto-asset securities. Where a crypto-asset is characterised as a commodity rather than a security, it falls outside the securities enforcement perimeter, though general fraud provisions under the Criminal Code of Canada may still apply. 2.6 Non-Compliance Canadian regulators have significantly intensified enforcement activity. A co-ordinated CSA sweep between June 2025 and February 2026 identified and deactivated 7,586 fraudulent crypto platforms linked to more than 13,000 URLs. Provincial securities regu- lators have issued cease-trade orders against unreg- istered CTPs, taken enforcement action against non- compliant ICOs and penalised misleading marketing by crypto businesses. FINTRAC imposed approxi- mately 20 administrative monetary penalties in 2025 (and 23 Notices of Violation in fiscal year 2024-25, a record), including its largest ever single penalty of approximately CAD176.9 million against Xeltox Enter- prises Ltd. (operating as Cryptomus) on 22 October 2025 for systemic AML/CTF compliance failures, including over 1,000 failures to file suspicious transac- tion reports. KuCoin (operating through Peken Global Limited) was assessed a CAD19.55 million penalty on 28 July 2025 (publicly disclosed September 2025) for failing to register as a foreign MSB and related reporting failures; the penalty is currently under appeal before the Federal Court of Canada. By March 2026, FINTRAC had revoked 23 crypto-related MSB regis-
trations. Into 2026, FINTRAC has increased scrutiny of MSBs, with non-compliance resulting in a growing number of fintech companies losing their registrations and facing escalating monetary penalties. FINTRAC’s compliance expectations have also climbed to explic- itly require a risk-based approach to AML/CTF obli- gations, raising the bar for all reporting entities in the virtual currency space. Cross-border breaches have been addressed through registration revocations and penalties against foreign entities serving Canadian cli- ents without proper registration. The regulatory out- look for the next 12 months points toward continued intensification of enforcement as the Stablecoin Act framework becomes operational and CIRO’s Digital Asset Custody Framework beds in. 3. Licensing and Set-Up Requirements 3.1 Licensing Requirements The triggers for licensing in Canada depend on the nature of the activity. Where a business trades in, advises on or manages portfolios of crypto-assets that constitute securities or derivatives, registration under applicable provincial securities legislation is required unless an exemption applies. CTPs that hold or have access to client crypto-assets are expected to pursue full investment dealer membership with CIRO. Separately, any business offering virtual currency exchange, transfer or custodial services must regis- ter with FINTRAC as an MSB regardless of whether securities laws apply. Territorial reach is determined by where services are provided rather than where a firm is incorporated. A foreign entity serving Canadian clients may be required to register in Canada even without a physical presence here, as demonstrated by enforcement actions against unregistered foreign plat- forms. New entrants must seek full registration from the outset, as transitional arrangements previously available to existing platforms are no longer open to new applicants. 3.2 Set-Up Requirements Licensing and registration requirements in Canada are technology neutral, with obligations determined by how a given crypto-asset or service is legally charac- terised. For investment dealer registration with CIRO, firms must meet capital adequacy requirements,
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