Bank of Canada Issues Compliance Order to Fintechs
The Bank of Canada has issued a compliance order to financial technology companies, signaling a tightening of regulatory standards. The move reflects a broader global trend of increased oversight for payment and cryptocurrency platforms. This macro development could influence the strategies of crypto projects aiming for mainstream adoption.
- The specific compliance order was issued on February 17, 2026, to Toronto-based fintech firm XTM Inc. and its affiliates. The order forces a halt to all transactions and withdrawals associated with its "AnyDay" platform, which is used by restaurants to distribute tips to employees. - This is the first-ever compliance order issued under Canada's Retail Payment Activities Act (RPAA), which came into effect in September 2025. The Bank of Canada cited "serious concerns" that XTM failed to safeguard user funds, leading to a "significant shortfall" that harmed end-users. - The RPAA applies to any payment service provider (PSP) that performs electronic fund transfers in fiat currency. For crypto businesses, this means that while purely crypto-to-crypto services are out of scope, any platform that includes fiat on/off-ramps, holds fiat balances for users, or offers crypto-backed payment cards is likely required to register with the Bank of Canada. - In addition to the RPAA, any company in Canada that exchanges, transfers, or sells cryptocurrency must register as a Money Services Business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This registration brings with it anti-money laundering (AML) and Know Your Customer (KYC) obligations. - The Canadian government is also advancing a dedicated regulatory framework for stablecoins, introduced in Budget 2025 as the "Stablecoin Act". This legislation will give the Bank of Canada authority to oversee fiat-backed stablecoin issuers, requiring them to maintain adequate reserves and establish clear risk management policies. - The forthcoming Stablecoin Act will also amend the RPAA to explicitly include payment functions related to the transfer or maintenance of tokenized payment instruments. This signals a clear intent to bring stablecoin payment rails under the same supervisory umbrella as traditional electronic fund transfers. - In response to the evolving regulatory landscape, a coalition of Canadian financial institutions and fintech leaders, including National Bank of Canada, Shopify, and Wealthsimple, are backing the launch of a regulated Canadian dollar stablecoin. The project, led by Tetra Digital Group, aims to launch in early 2026 and represents a domestic effort to create a trusted digital payment option.
