CANADA Law and Practice Contributed by: Irbaz Wahab, Cloudhaus Law
tantly, Canadian clients must be clearly informed of the identity of the actual regulated entity providing the financial service, regardless of the brand presented to them. Disclosure and disclaimer requirements exist to ensure that clients understand who is responsible for the regulated activity and to whom regulatory protec- tions apply.
harm. In the absence of a bespoke framework, gen- eral principles of tort law, contract law and applica- ble securities legislation would govern disputes aris- ing from DeFi activities, though the pseudonymous and decentralised nature of DeFi creates significant practical challenges in identifying responsible parties and attributing liability. To date there have been no significant Canadian enforcement actions specifically targeting DeFi protocols.
5. Decentralised Finance 5.1 Ability to Use DeFi
6. Payments and Stablecoins 6.1 Payments
DeFi is not explicitly prohibited in Canada, though there is no bespoke regulatory framework address- ing it. The CSA’s general position is that regulatory obligations attach to the nature of the activity rather than the structure through which it is delivered, mean- ing DeFi platforms facilitating trading in crypto-assets that constitute securities or derivatives may still trigger registration obligations. CeFi firms are not prohibited from utilising DeFi protocols in connection with their services, but must ensure doing so does not breach existing obligations around custody, KYC, suitability and AML/CTF compliance. 5.2 DeFi Structures There are no corporate structures in Canada spe- cifically designed for DeFi operations. Participants in DeFi activities typically use conventional Canadian corporate structures such as federally or provincial- ly incorporated companies, limited partnerships or trusts. DAOs have no recognised legal status under Canadian law and remain uncommon in the Cana- dian market, largely due to legal uncertainty around their status, governance and liability exposure under Canadian law. Participants in DAO-based arrange- ments may face personal liability exposure in the absence of a recognised legal wrapper. There are no specific substance or capital requirements tailored to DeFi structures in Canada. However, where a DeFi operation triggers securities registration or MSB reg- istration requirements, the applicable prudential and compliance obligations of those regimes would apply regardless of the structure used. 5.3 Liability Canadian courts and regulators have not yet direct- ly addressed liability in the context of DeFi-specific
No crypto-asset is recognised as legal tender in Can- ada. Under the Currency Act, legal tender is limited to Bank of Canada notes and coins issued under the Royal Canadian Mint Act. Crypto-assets are generally treated as commodities rather than currency, meaning their use in payment transactions is analogous to bar- tering rather than a conventional currency exchange, and may trigger capital gains or loss consequences for tax purposes. That said, crypto-assets can be used as a means of payment in private transactions where both parties agree, and an increasing number of Canadian merchants accept Bitcoin and other cryp- to-assets through payment processing intermediaries. The RPAA, which came into force in phases begin- ning in 2024, establishes a federal framework under which the Bank of Canada supervises payment ser- vice providers. The 2025 federal budget announced an intention to amend the RPAA to bring stablecoin- based payment services within the federal supervisory perimeter. The launch of CADD, Canada’s first CAD- backed stablecoin issued by a regulated financial institution, alongside the enactment of the Stablecoin Act, represents a significant step toward modernising and normalising the use of digital assets for payment purposes in Canada, potentially narrowing the gap between crypto-asset payments and conventional currency transactions over time. 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins The Stablecoin Act (Bill C-15), which received Royal Assent on 26 March 2026, focuses specifically on fiat-referenced stablecoins, defined as crypto-assets designed to maintain a stable value by reference to a
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