In August 2024, the Bank of Canada (the Bank) released further
guidance on changes to the Retail Payment Activities Act
(RPAA), which included case studies on Payment Service Providers
(PSPs) that would need to register with the Bank under the RPAA.
Now in effect, the RPAA’s initial registration period opened on
November 1, 2024, and will conclude on November 15, 2024.
Entities impacted by the RPAA include, but are not limited to,
payroll services, e-commerce web tools, and cloud computing. The
above-noted case studies also include details and guidance on
“providers of services backed by cryptocurrencies.”
This category has notable overlap with entities that are regulated
under the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act (PCMLTFA), which applies broadly to
companies dealing in virtual currency.
The Bank has issued guidance as to the persons and services
captured under the RPAA to supplement the somewhat vague wording of
current legislation. As we will explore, the RPAA effectively
requires registration and compliance for all persons who meet the
definition of a money services business under the PCMLTFA and also
meet the definition of a payment service provider under the RPAA.
All persons who meet the definition of a PSP will meet the
definition of a ‘money-services business’ (MSB). However,
not all MSBs will necessarily be a PSP.
Under the RPAA, the Bank is responsible for supervising PSPs,
with the goal of building confidence for consumers and end-users of
the services in the reliability and safety of the service provided.
The Bank promotes compliance with the RPAA by reviewing evolving
technologies that are to be captured under the requirements and
ensuring that PSPs offering those products are registered with the
Bank to “mitigate operational risks and safeguard end-user
funds.”1 With the Bank turning its attention to
fintech and cryptocurrencies in recent years, and with its most
recent guidance on the industry published in October 2024,
crypto-trading platforms (CTPs) and companies dealing in
cryptocurrencies need to be mindful about whether they will be
classified as PSPs and upcoming registration deadlines.
A PSP is defined under the RPAA as “an individual or
entity that performs payment functions as a service or business
activity that is not incidental to another service or business
activity.”2 Among other criteria, you may be
classified as a PSP if you perform any of the following payment
functions:3
The RPAA requires that PSPs register with the Bank before
performing anything it deems to be a retail payment activity, which
it defines as “a payment function that is performed in
relation to an electronic funds transfer that is made in [a fiat
currency or a prescribed unit].”5 By releasing the
case scenarios, the Bank provided greater clarity for entities to
determine which frameworks might apply to their business.
As mentioned above, in October 2024, the Bank provided the
following guidance and case scenarios about providers of services
backed by cryptocurrencies:6
For further clarity, the above scenarios are designed by the
Bank to highlight what registrable payment functions would look
like in a cryptocurrency context.7 If your digital
assets business performs one of these payment functions, they are
additive to the earlier guidance, and you may need to register even
if it was not described in the previous case studies.
As discussed, a PSP will be an MSB subject to FINTRAC
supervision, although not all MSBs will be a PSP. The PCMLTFA is a
separate regime overseen by Financial Transactions and Reports
Analysis Centre of Canada (FINTRAC). This legislation requires
companies categorized as an MSB to register with FINTRAC. Under the
PCMLTFA, businesses offering services dealing in virtual currency
are deemed to be MSBs and must:8
With the new scenarios released by the Bank, MSBs dealing in
virtual currencies may also have to add registration as a PSP to
this list of requirements.
The term “Money Services Business” captures a much
broader scope of activities. Under the PCMLTFA, any person or
entity offering an enumerated MSB service will qualify as an
MSB.9 These services include, but are not limited to,
remitting or transmitting funds, providing crowdfunding platform
services and of course, dealing in virtual currency. Comparatively,
the RPAA has a far narrower scope. PSPs are limited to entities
performing a payment activity in the retail context. A detailed
list of this activities has been included in the “What is a
Payment Service Provider?” section above.
Further, while these acts regulate similar businesses they do so
with different objectives. The RPAA is designed to protect Canadian
businesses and consumers through regulating retail payments. By
contrast, the PCMLTFA is intended to “fight money laundering
and terrorist financing, both domestically and
internationally.”10
It is possible that businesses will be required to register
under both the RPAA and the PCMLTFA. Cryptocurrency businesses that
are currently registered as MSBs with FINTRAC may also be captured
as PSPs under the RPAA. Despite similarities between these two
regimes, registration under one does not preclude you from
registration under the other. Companies that fall under the scope
of both acts must register under both acts.
There are some important exceptions to the need for double
registration. The RPAA has excluded from PSP registration
activities “giving effect to” an eligible financial
contract under the Canada Deposit Insurance Corporation
Act (CDIC) as well as those regulated by or exempt from
securities regulations are not required to register as a
PSP.11
Eligible financial contracts are defined in Section 2 of the
Eligible Financial Contract Regulations of the CDIC to
include derivative agreements and agreements related to the
borrowing, lending and repurchasing of securities.12 The
Bank considers activities to be “giving effect to” an
eligible financial contract if:13
The Bank has carved out an additional exclusion for qualifying
securities businesses. Securities-related entities may be exempt
from PSP registration if they:14
Any MSB that is qualifying securities-related entity would
therefore not be required to register as both a PSP and an MSB.
The Bank of Canada has provided a detailed step-by-step guide on PSP registration
applications. You can consult their guide for more information
about what is required to be included in any application. If you
believe you qualify as a PSP, you will want to be mindful of the
upcoming registration periods.
The RPAA’s initial registration period began on November 1,
2024, and will end on November 15, 2024. If you miss this deadline,
you can still register from November 16, 2024, onwards, however you
will face delays. Any business that applies after the initial
registration period must wait at least 60 days from their
application date to commence retail payment activities.
As regulation and legislation surrounding digital assets begin
taking shape, companies dealing in virtual currency, whether
directly or indirectly, must ensure that they remain compliant with
the law. The Bank’s decisions for PSP registration applications
submitted during the initial registration period are expected to be
issued beginning in early September 2025. Companies should
determine whether they have an obligation to register as a PSP
ahead of the above deadlines.
Footnotes
1 Retail Payment Activities Act, SC 2021, c 23
[RPAA].
2 RPAA, s 177.
3 Bank of Canada, “Criteria for registering payment
service providers” (last modified 2 October 2024), online:
4 To help individuals and entities assess whether they
may be subject to PSP registration under the RPAA, the Bank
provides a self-assessment tool.
5 RPAA, s 2.
6 Bank of Canada, “Case scenarios about providers
of services backed by cryptocurrencies” (2 October 2024),
online:
7 Ibid.
8 Financial Transactions and Reports Analysis Centre of
Canada (FINTRAC), “Money services businesses” (last
modified 18 September 2024), online:
9 Ibid.
10 Financial Transactions and Reports Analysis Centre of
Canada (FINTRAC), “The Proceeds of Crime (Money Laundering)
and Terrorist Activity Financing Act and Client Identity
Verification” (last modified 29 June 2017), online:
11 Canada Deposit Insurance Corporation Act, RSC
1985, c C-3.
12 Eligible Financial Contract Regulations (Canada
Deposit Insurance Corporation Act), SOR/2007-255.
13 Bank of Canada, supra note 3.
14 Ibid.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
