%20(1)%20-%20compressed.jpg)
As of the end of 2022, Canada had taken concrete steps to apply its existing securities and anti-money laundering laws to the fast-growing world of cryptocurrency. This blog provides an overview of how Canadian law treated crypto assets and trading platforms up to that point—and highlights key implications for fintech companies, crypto startups, venture capital investors, and global lawyers monitoring this space.
Are Crypto Assets Securities in Canada?
Canadian regulators evaluate a crypto asset based on its substance rather than form. Crypto assets that function as investment contracts, derivatives, or shares may fall under provincial or territorial securities laws.
This includes tokens issued through Initial Coin Offerings (ICOs) or other token-generating events. Tokens that provide ownership interests, profit-sharing, or imply reliance on a central entity may be considered securities. Determinations are made on a case-by-case basis, and classification remains uncertain for many projects that do not fall clearly into established categories.
How Are Crypto Trading and Investment Activities Regulated?
Crypto asset trading platforms (CTPs) are required to register with a Canadian securities regulator if they:
- Facilitate the trading of crypto assets that are securities or derivatives;
- Hold custody of client assets without immediate delivery;
- Offer contracts that create ongoing reliance by clients on the platform.
This requirement applies to both Canadian and foreign platforms serving Canadian users. As of 2022, platforms such as Wealthsimple Digital Assets, Netcoins Inc., Newton Crypto Ltd., and VirgoCX had received registration decisions or were operating under pre-registration undertakings with regulators.
Unregistered platforms may face enforcement actions. The Canadian Securities Administrators (CSA) maintains a public list of platforms that are not authorized and warns investors against using unregistered services—particularly those that hold custody of client assets.
The Travel Rule and Anti-Money Laundering Measures
In 2022, Canada implemented compliance measures aligned with the Financial Action Task Force (FATF)’s Travel Rule, enforced through the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Under these rules, virtual asset service providers (VASPs) must collect and transmit identifying information for virtual currency transactions of CAD 1,000 or more. These measures apply to cross-border transactions, wallet providers, and fintech platforms that facilitate crypto payments—bringing Canada’s crypto-related AML/CFT requirements in line with international expectations.
Regulation of Promotion and Advertising
On September 23, 2021, the CSA and the Investment Industry Regulatory Organization of Canada (IIROC) issued Joint Staff Notice 21-330, addressing the marketing and promotional practices of crypto-trading platforms.
The guidance outlines key expectations:
- Marketing materials must be accurate and not misleading;
- Fee and risk disclosures must be clear and transparent;
- Firms must avoid “gamification” or promotional tactics that may mislead retail investors.
These rules affect how platforms engage users via digital marketing, social media, and mobile applications—and should be considered when designing investor-facing content for the Canadian market.
Crypto Investment Products: ETFs and Public Funds
Between 2020 and 2021, Canadian regulators approved several crypto-related public investment products, including:
- Exchange-listed Bitcoin and Ether funds launched by 3iQ in 2020;
- Physically settled Bitcoin and Ether ETFs approved for Purpose Investments in 2021;
- Additional Ether-based ETFs and public funds introduced by other asset managers in 2021.
While these vehicles offer regulated access to crypto exposure through public markets, the underlying assets remain volatile and are subject to compliance requirements relating to custody, risk disclosures, and liquidity management.
Practical Implications and Uncertainties
Despite the application of securities and AML laws to the crypto space, several uncertainties and challenges persist:
- Scope and timing of enforcement: Regulatory expectations continue to evolve. Unregistered platforms—particularly those operating from outside Canada—remain exposed to legal and reputational risks.
- Unclear classification of assets: Whether a token qualifies as a security depends on nuanced factors. This creates legal uncertainty, particularly for crypto startups planning public offerings or utility tokens.
- Compliance burden on fintechs and VASPs: The combination of Travel Rule obligations and securities law compliance adds legal and operational complexity—especially for cross-border startups.
- Investor due diligence: Venture capital firms and institutional investors must assess not only the legal status of the crypto asset but also the registration and custodial structure of any trading platform involved.
- Cross-border challenges: Legal inconsistencies between jurisdictions create friction for global firms. International legal advisors must navigate overlapping, and sometimes incompatible, regulatory regimes.
Conclusion
In 2022, Canada continued to apply its existing securities and anti-money laundering frameworks to the growing crypto sector. While a basic compliance structure is in place, there remains a need for greater clarity on how regulators interpret new token models, decentralized finance structures, and emerging digital asset types.
Crypto startups, fintechs, investors, and legal professionals focused on global markets should closely monitor regulatory developments and assess compliance obligations early—especially when offering services in, or targeting, the Canadian market.