Canadian Financial Licences 2025: MSB and PSP – What is the difference and which one is right for you?

Canada is one of the most attractive countries for registering companies involved in financial services, cryptocurrency, and electronic payments. Easy interaction with banks, transparent regulatory requirements, and a strong international reputation make it an excellent launch pad for projects targeting the US, European, and Asian markets.

There are two key forms of regulation: the MSB (Money Services Business) licence and the PSP (Payment Service Provider) model. Despite certain similarities, these are two fundamentally different approaches to doing business. It is important to understand the opportunities and obligations they impose in order to choose the right option for your business.

What is MSB and how does it work?

MSB is a licence issued to companies through registration with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada). This status is mandatory for firms engaged in money transfers, currency exchange, and cryptocurrency.

MSB includes: 

• exchange of fiat currencies;
• cross-border transfers between private and corporate clients;
• cryptocurrency transactions (exchange, sale, storage);
• prepaid card and electronic money transactions;
• financial services related to the movement of cash.

При этом MSB не является банковской лицензией. Компания не имеет права предоставлять кредиты или открывать депозитные счета. Но статус MSB позволяет вести работу с платёжными шлюзами, финтех-платформами, клиентскими аккаунтами и криптовалютной инфраструктурой.

What is PSP and what tasks does it solve?

PSP (Payment Service Provider) — a payment solutions provider responsible for the technical side of transaction processing. Formally, PSP licensing in Canada is not a separate category, but such companies operate under contract with banks or in cooperation with MSBs.  PSP is a federal registration with the Bank of Canada in accordance with the Retail Payment Activities Act (RPAA).

Typical PSP tasks:

• accepting online payments through online stores, applications and APIs;
• integration with acquiring systems and POS terminals;
• routing and conversion of payments;
• data protection and 3D Secure authentication;
• distributing funds between platform users.

Thus, a PSP company may not store customer funds, but only transfer them from the buyer to the seller. This removes some of the regulatory burden, but requires cooperation with financial institutions that have MSB status or a banking licence.

MSB and PSP: differences in regulation

The main difference between MSB and PSP lies in their responsibility to the regulator:

• MSB is required to comply with strict anti-money laundering (AML) measures, implement KYC procedures, appoint compliance officers, and submit reports to FINTRAC.
• PSPs can operate through an agreement with a bank or MSB and do not need their own licence if they do not conduct monetary transactions on their own behalf.

In addition, MSBs are required to verify the sources of their clients' funds, analyse transactions for suspicious activity, and ensure transparent financial reporting. This is more complicated and expensive, but it provides greater independence.

Advantages of an MSB licence

• Recognition — having an MSB licence makes a company legal in the eyes of banks, investors and other market participants.
• Working with cryptocurrencies — the Canadian regulator officially recognises virtual assets and includes crypto operations within the scope of the MSB licence.
• Flexibility — the licence covers various areas: exchange, transfers, electronic money.
• Quick launch — with all the necessary documents, an MSB can be registered in 4–6 weeks.
• Entry into the US market — thanks to agreements between countries, companies with an MSB licence can enter into partnerships with American fintech platforms and banks.

Advantages of the PSP model

• Minimal obligations — no direct responsibility to the regulator (if there is no direct handling of money)
• Simplified structuring — no need to appoint compliance officers, reporting, or AML policies
• flexibility for IT businesses — the model is well suited for start-ups creating payment interfaces, APIs, cash registers, widgets;
• the ability to work under partnership schemes — through connection to existing MSBs or banks.
• PSP is an important addition to MSB, particularly when a company wants to provide payment system services.

Documents required for MSB registration

1. company's statutory documents (federal or provincial registration);
2. proof of address in Canada;
3. appointment of a director and compliance officer;
4. AML and KYC policies;
5. business plan describing operations, clients, regions;
6. beneficiary information;
7. FINTRAC registration forms.

Additionally, you will need a corporate bank account and registration with the federal tax system (CRA).

PSP requirements

If a PSP does not work directly with customer funds, a separate licence is not required. However, in any case, the company must:

• enter into an agreement with a financial institution (bank or MSB);
• comply with PCI DSS security standards;
• maintain internal documentation and describe risk models;
• use secure data transfer protocols;
• be prepared for audits by partners.

How to choose between MSB and PSP?

Choose MSB if: 

• you work with cryptocurrency, transfers or currency exchange;
• you plan to independently control client accounts;
• you want to create a reliable infrastructure with access to global markets;
• you have a team ready to support compliance and legal integrity of the business.

Choose PSP if: 

• your main task is the integration and transfer of payments;
• you provide services to other companies;
• you do not want to incur additional regulatory costs;
• you do not plan to store funds or work with cryptocurrency.

Start-up costs

The exact figures depend on the scope of work, jurisdiction of registration and complexity of the case. On average, the prices are as follows:

• MSB registration — from CAD 15,000 (including legal support, documents, business plan, AML and KYC policies);
• MSB maintenance — from CAD 5,000 per year (including reporting, transaction verification, audit);
• PSP without MSB can be launched at minimal cost if the partner (bank or payment system) already covers licensing.

Conclusion

Canadian financial licences remain relevant in 2025 thanks to high trust from global players, clear regulatory requirements, and ample opportunities for scaling. The MSB licence is suitable for full-fledged crypto and fintech companies that want to have complete control over their operations. PSP is a more flexible and less burdensome option that is suitable for startups, IT companies, and integrators.

To make the right choice, it is important to assess your current business model, target audience, customer geography, and development plans. If you need flexibility without going beyond the law, Canada can offer the right tools.