New developments: Regulation of payment service providers in Canada – Government, public sector

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On April 30, 2021, as part of the 2021 federal budget, the Canadian government tabled Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and to implement other measures (The law project”)
1 for first reading in Parliament. The bill contains the initial draft of the Retail Payment Activities Act (the “RPAA”), which, if enacted, would represent the premier regulatory oversight framework for retail payment service providers in the Canadian market.

Application of RPAA

The RPAA, as drafted, would apply to “payment service providers” (PSPs) located both in Canada and abroad. A PSP located in Canada that performs “retail payment activity” for an end user in Canada and a PSP located outside of Canada that “conducts” retail payment activities to persons in Canada would have the same responsibilities under the RPAA. The definition of a “retail payment activity” leaves open the possibility that the RPAA applies to transfers of electronic money or cryptocurrency as well as fiat money: it is a payment function. that is performed in connection with an electronic funds transfer (EFT) that is made in the currency of Canada or another country or “using a unit that meets the prescribed criteria”. A PSP is defined 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. Hopefully, guidance will be provided before the PGRFA goes into effect, defining how to determine whether payment functions provided by a person are “incidental” to related activities.


Certain entities and activities are exempt from the application of the PGRFA under the bill, and the legislation will also give the federal government the power to create other exemptions by regulation. As noted, the definition of PSP contains an exemption for persons who perform payment functions as a service or business activity ancillary to another service or business activity. In addition, the RPAA provides the following express exemptions:

  • Closed-loop gift cards or similar instruments: payment functions performed in connection with an EFT that is made with an instrument issued by a merchant (or by an issuer that is not a PSP and has an agreement with a group of merchants ) which allows the instrument holder to purchase goods or services only from the issuing merchant or any merchant in the group.
  • Payment functions giving effect to Canada Deposit Insurance Corporation Act contracts.
  • Cash withdrawals at ATMs.
  • Payment functions performed using a system pursuant to Article 4 of the Payment Clearing and Settlement Act (including Interac transfers).
  • Payment functions performed exclusively between affiliated entities.
  • In addition, entire categories of entities are exempt from RPAA on the grounds that they are already regulated by current legislation, namely regulated financial institutions (banks, licensed foreign banks, credit society and savings banks and credit), companies governed by the Insurance Companies Act (Canada) or the Trust and Loan Companies Act (Canada), and trust companies governed by provincial legislation.

Impact of RPAA

Entities and individuals subject to the regulation of the RPAA will be required to register with the Bank of Canada (the “BoC”). There will be a transition period, during which PSPs in Canada who currently conduct retail payment activities for end-users in Canada or PSPs located outside of Canada who currently conduct retail payment activities for people in Canada can continue their activities while applying for registration with the BoC. On the other hand, new PSPs will need to apply for registration before conducting retail payment activities. The RPAA project proposes that the BoC maintain a public register of registered PSPs, PSPs whose applications have been refused and PSPs whose applications have been revoked.1075494b.jpg

In addition to the registration requirement, the RPPA will require registered PSPs to meet certain disclosure requirements, including filing an annual report with the BoC. The RPAA will also impose specific requirements on registered PSPs regarding the holding and management of end-user funds. Registered PSPs will also be required to implement and maintain a risk management and incident response framework that meets certain prescribed requirements.

Currently, many FSPs operating in the Canadian market have registered as “money services businesses” with the Financial Transactions and Reports Analysis Center of Canada (“FINTRAC”) under Canadian anti-money market legislation. money laundering (the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or “PCMLTFA”). Separate record keeping and reporting obligations apply to entities registered under the PCMLTFA, and we anticipate that prior to the entry into force of the PGRFA we will see regulatory guidance outlining how entities should navigate. by being regulated by two separate government entities while carrying out the same activities.


1 C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and to implement other measures, 2nd sess, 43rd leg, 2021, (first reading April 30, 2021); most recent published text retrieved fromère-lecture.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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