CANADA Law and Practice Contributed by: Irbaz Wahab, Cloudhaus Law
maintain appropriate custody arrangements for client assets in accordance with CIRO’s Digital Asset Custo- dy Framework, satisfy KYC and suitability obligations, and demonstrate adequate compliance infrastructure including a designated compliance officer and written policies and procedures. For MSB registration with FINTRAC, firms must appoint a compliance officer, implement a written compliance programme, conduct risk assessments and maintain prescribed records. Physical presence in Canada is not always explicitly required for registration purposes, though regulators expect firms to have sufficient operational substance to meet their ongoing compliance obligations. Pru- dential requirements for investment dealers include minimum capital thresholds set by CIRO, while sta- blecoin issuers under the Stablecoin Act must main- tain 1:1 reserves of high-quality liquid assets held in bankruptcy-remote arrangements with qualified cus- todians. 3.3 Change of Control Crypto-asset firms in Canada must comply with gen- eral corporate law and change-of-control require- ments that may arise under the Competition Act and the Investment Canada Act. Firms registered as investment dealers with CIRO are required to obtain prior approval for certain changes in ownership or control. Registered MSBs must notify FINTRAC of changes to beneficial ownership and senior officers within 30 days of the change occurring. 3.4 Passporting Canada operates a passport system for securities registration under Multilateral Instrument 11-102 and National Policy 11-204, in conjunction with the reg- istration framework of National Instrument 31-103, which allows firms and individuals to register across multiple provincial and territorial jurisdictions by deal- ing primarily with a single principal regulator. This streamlines the multi-jurisdictional registration pro- cess and avoids the need to make separate appli- cations to each province individually. The National Registration Database is used to manage registration electronically across participating jurisdictions, with the CSA overseeing consistent registration stand- ards for dealers and advisers nationwide. There is no equivalent mechanism providing automatic or prefer- ential access to foreign jurisdictions. Firms seeking to
operate internationally must comply with the regula- tory requirements of each jurisdiction in which they intend to carry on business.
4. Cross-Border Services 4.1 Marketing
Where a crypto-asset is characterised as a security, marketing activities must comply with provincial pro- spectus and advertising rules, including prohibitions on misleading statements. Even where a crypto-asset is not a security, marketing remains subject to general prohibitions against false or misleading representa- tions under the Competition Act and applicable pro- vincial consumer protection statutes. The CSA has repeatedly emphasised the need for marketing dis- closures in the crypto-asset sector to be accurate and transparent, and has taken enforcement action against firms making misleading product-related claims. The CSA has also issued marketing-related guidance for CTPs to support balanced risk disclo- sures to prospective investors. On reverse solicitation, an exemption may be available where a foreign firm responds to a Canadian client’s unsolicited approach rather than actively marketing into Canada. However, this area is not well defined for crypto-assets specifi- cally and firms should seek legal advice before relying on it. 4.2 White Labelling There is no explicit prohibition on white-label arrange- ments in Canada’s crypto-asset regulatory framework. However, a foreign firm seeking to leverage the licence of an existing Canadian registered entity to sell prod- ucts or services into Canada must ensure that the arrangement does not result in the foreign firm itself carrying on registrable activities without the appropri- ate registration. The underlying regulatory obligations attach to the activity being performed rather than the brand under which it is offered, meaning that com- pliance responsibilities cannot be contracted away through a white-label structure. In practice, white- label arrangements are possible where the licensed Canadian entity retains meaningful control over and responsibility for the regulated activities, and where the arrangement is structured to satisfy applicable KYC, suitability and AML/CTF obligations. Impor-
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